Argentina, Gov’t and Bondholders Reach Agreement

On 4 August, Argentina’s economy ministry announced it had reached an agreement with three key groups of bondholders over the restructuring of some US$66bn of sovereign debt issued under international law.
Argentina Bondholders Agreement

Analysis:

After nearly four months of tense negotiations, which only one day prior remained perilously close to falling through, Argentina appears to have landed a debt restructuring deal. Provided that it can be finalised, the deal will provide huge relief for the government led by President Alberto Fernández. Not only will it save the government billions of US dollars (US$35bn according to estimates by local daily La Nación) in debt repayments and resolve the current default, but it will allow it to turn its attention to renegotiating its debts with the International Monetary Fund (IMF) and to planning a way out of the two-year economic recession exacerbated by the coronavirus (covid-19) pandemic.

  • The economy ministry issued a statement in the early hours of the morning announcing it had reached an agreement with the Ad Hoc Group, the Argentina Creditor Committee, Argentina Exchange, and other bondholders just hours before its offer was due to expire later today (4 August). According to the statement, the agreement will “allow them [bondholders] to support Argentina’s debt-restructuring proposal” and would “grant Argentina significant debt relief”.
  • The statement says that the agreement requires Argentina to bring forward some debt repayments “without increasing the total amount of capital or interest payments”. Full details of the agreement were not provided. However, the local media had been reporting that the Fernández government accepted to marginally improve its offer to pay on average US$54.80 for every US$100 of the face value of the bonds, up from the US$53.50 it has previously offered, but lower than the US$56.50 that bondholders had been demanding.

Looking Ahead:

Argentina has set a new deadline of 24 August for concluding the negotiations, providing enough time to submit the offer to the US Securities and Exchange Commission (SEC) and for bondholders to formally accept it. However, the ample extension and the discrepancy in reports of the deal’s value add weight to local reports that some of its elements remain to be finalised.

In brief: Another tough month for Uruguayan exporters

* Uruguay’s national export promotion agency, Uruguay XXI, has released its latest report on foreign trade, according to which the country’s exports totalled US$659m in July, representing a 19% reduction year-on-year compared with July 2019. This decline was mostly due to reduced demand for Uruguayan soya and cellulose, with rice exports remaining strong and meat exports recovering after a difficult few months. Uruguay’s export sector has been hit hard by the global economic crisis caused by the coronavirus (Covid-19) pandemic. In the first seven months of the year, exports totalled US$4.4bn – down 17% on the same period in 2019. Cellulose, meat, and soya exports have declined the most, while rice has proved the most resilient export.

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