MercoPress. South Atlantic News Agency

Argentina skips default thanks to agreement with Paris Club

“A default situation would have been a blow to the economy,” Guzmán explained. Photo: EFE

Argentina's Economy Minister Martín Guzmán Tuesday announced that the Paris Club had agreed to give his country until March 31, 2022, to pay the US $ 430 million in instalments while the rest of the debt is renegotiated.

Guzmán explained the understanding to extend payment terms saved Argentina from another default. “A default situation would have been a blow to the economy that would have done particular damage,” he said.

“After constructive negotiations, an understanding was reached: the country will have time until March 31, 2022, to resolve the debt with the Paris Club and in turn, it will continue to make efforts to reach an agreement with the IMF and the stock of debt of US $ 45,000 million that the Government of Cambiemos took that was not to increase the productive capacity,” the minister added.

Regarding disbursements, Guzmán explained that “there is no advance payment, but a proportional payment scheme, the dates are being defined and the first one is possibly July 31.”

Guzmán added that “everything will be framed in a decree.” The minister also explained that “payments are made on account of the capital.” He also defined the new March 31, 2022 deadline as “a time bridge” so as not to default. “In the 8-month period, instead of facing the approximately 2,400 million dollars programmed, a set of payments will be made that will total around 430 million dollars“, which ”implies a financial relief for Argentina of 2,000 million dollars between now and March 31.”

Guzmán announced that the first payment would be “on July 31 and a second will be next year”, within the framework of “a proportional payment scheme” that will be “on account of capital” of the total debt. These payments will give Argentina time until March 31, 2022, to renegotiate its debt with the agency, while talks with the International Monetary Fund (IMF) to refinance the US $ 44,000 million” from the previous administration go on.

“The understanding is that Argentina will have time until March 31, 2022, to aim for a more permanent restructuring with the Paris Club and that Argentina will continue to make efforts to reach an understanding with the IMF.

“Paying that amount would have been a blow to international reserves and would have generated more exchange rate and macroeconomic instability in general. A default situation would also have generated destabilizing effects and uncertainty and unpredictability that in this context would do particular damage,” he added.

The minister insisted the Government was making progress in international negotiations to “create conditions of predictability that are conducive to enabling Argentina to sustain economic recovery and aim at the objectives of job creation, inflation reduction, poverty reduction and economic growth.”
He also pointed out that a “higher debt burden in dollars means lower possibilities for production growth, greater inflation pressure. So being able to resolve unsustainable dollar debt commitments will help the country to be able to solve all its economic and social problems.”

Guzmán stressed that former President Mauricio Macri's borrowing was not allocated “to generate production, goods and services that the country can export to the world, to be able to face it [paybacks] in a timely manner.”

“During the past year, we carried out negotiations with private creditors that ended up in a historic debt restructuring for Argentina and this year we are carrying out negotiations with the IMF and the Paris Club, in order to clear the debt maturity horizon.”