Argentina Gov’t Still Looking to Reach Debt Restructuring Deal

On 23 June Argentina’s economy minister, Martín Guzmán, said that the Argentine government still hopes to reach an agreement with foreign bondholders over the restructuring of US$66bn worth of sovereign debt “sooner rather than later”.
Argentina Debt Restructuring Deal

Analysis:

Guzmán’s remarks come just four days after the government led by President Alberto Fernández decided to extend for the fifth time, until 24 July, the deadline for bondholders to accept its restructuring offer. The month-long extension is the longest yet, raising concerns that the Fernández administration is not close to reaching a deal with bondholders, even after the submission of its latest improved offer. Resolving Argentina’s debt crisis as quickly as possible is seen as essential for the country’s economic recovery. This puts the Fernández administration under growing pressure to offer further concessions to bondholders, in order to secure a deal.

  • The Fernández administration presented an improved offer to bondholders last week, just days ahead of the expiry of the previous deadline of 19 June. In this improved offer, the government reportedly proposed to pay US$50 for every US$100 worth of the nominal value of the bonds under negotiation, up from US$47 in its previous offer. However, bondholders are said to be demanding at least US$52 for every US$100 issued, and are reluctant to budge on this.
  • Guzmán commented on the state of negotiations yesterday, during an online conference organised by the Council of the Americas. “It is still our intention to resolve the debt crisis sooner rather than later”, Guzmán said. But the minister admitted that there still are differences between what Argentina can offer and what bondholders are demanding, impeding the striking of a deal. He reiterated that Argentina cannot meet the bondholders’ demands, as this would not make the debt sustainable.

Looking Ahead:

Guzmán insisted that Argentina remains open to further dialogue with bondholders to try to “find an understanding”. But with some bondholders expressing growing frustration with the negotiation process, the risk that they decide to abandon talks and promote lawsuits against Argentina remains latent.

In brief: Argentina’s growth slumps in Q1

* Argentina’s national statistics institute (Indec) has released new figures which show the country’s GDP fell by 5.4% year-on-year in the first quarter of 2020, although measures aimed to stop the spread of coronavirus (Covid-19) were only implemented in late March. The figures also show that GDP fell by 4.8% compared with the previous quarter. Also yesterday Indec released figures which show unemployment in the first quarter of 2020 reached 10.4%, up from 8.9% in the previous quarter and 10.1% in the first quarter of 2019.

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