Will Argentina again experience the nightmare of 2001? At the time, the country had made a historic default of $ 100 billion, leading to the worst social and economic crisis in its history. Friday, Argentina went into default again by failing to honor a $ 500 million deadline. However, nothing has yet been decided: negotiations for the restructuring of $ 66 billion of its debt continue.
The ninth defect in the country
The new default is the ninth in the country's history. However, the government of center-left president Alberto Fernandez is still trying to reach an agreement with the holders of Argentine bonds. Late Thursday evening, it had already announced to extend for the second time the deadline it had set for restructuring, by designating June 2 as the new deadline. This extension of only ten days seems to show that the government and its creditors could be close to an agreement, although the new deadline is not necessarily final.
The negotiations were to be completed originally by May 8 at the latest. But, in the absence of an agreement, they had been extended until Friday, the date on which the payment of interest of $ 500 million was due. In total, Argentina's debt reaches $ 324 billion, or almost 90% of its GDP.
If the government indicates that negotiations are on track, the main group of creditors of Argentina however demanded Friday "a direct and immediate discussion". “The group welcomes Argentina's expressed intention to work with creditors, but the actions speak louder than the words. In the past month, Argentina has had virtually no substantial communication with its creditors, "said a group made up of several investment companies, including BlackRock and Fidelity.
Government offer rejected
Argentine Economy Minister Martin Guzman has offered bondholders an exchange for new securities with a three-year grace period without payment, a 5.4% reduction on capital and 62% on the interests. But his offer was rejected. The creditors presented their own proposals, which the government is examining.
For the moment, Argentina is in particularly bad shape: the economy has been in recession for two years, inflation has peaked (53% in 2019) and poverty has continued to climb (33% in 2019). The coronavirus pandemic has forced the government to release funds to mitigate its effects on the most vulnerable residents and businesses.
The country now has no choice but to find a solution quickly. A situation of default allows creditors to demand before international justice an "acceleration" of the repayment of the debt, namely the request for its full payment. Another threat is that hedge funds acquire low-cost Argentine debt before turning to international justice.
Economy
Argentina: Deadline expired for debt agreement but negotiations continue
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