Argentina, Local Debt-Restructuring Bill Approved by Landslide

On 4 August, Argentina’s chamber of deputies gave final approval to a bill for the restructuring of the US dollar-denominated sovereign debt issued under domestic law.
Argentina Local Debt-Restructuring

Analysis:

The vote came after Argentina confirmed it had reached a much-celebrated accord with private bondholders over the restructuring of some US$66bn of debt issued under international law. The broad cross-party support for the bill yesterday appears to dispel any doubts over whether the foreign-law debt restructuring agreement will be approved once it is put to the legislature. It likewise bodes well for congressional backing for the outcome of the upcoming debt negotiations with the International Monetary Fund (IMF), although such negotiations will typically revive historical tensions between the IMF and the more hard-line members of the ruling Partido Justicialista (PJ, Peronists).

  • The bill, which had already been passed by the senate, was approved with 247 votes to just two against in the 257-seat lower chamber. According to the national congress’s budgetary office, the approved bill concerns a total of US$41.72bn of local-law US dollar-denominated bonds, which represents 12.9% of the country’s total debt and 12.5% of GDP. A total of 35% of these bonds are in private hands, the rest being held by public bodies. The bill would provide the government payment relief of US$19.6bn until 2030.
  • Following the vote, leaders from both sides of the political divide expressed their support. The president of the chamber’s finance commission, PJ Deputy Fernanda Vallejos, told Argentina’s official news agency Telam that the restructuring of the local debt will provide Argentina with “more freedom” to respond to the country’s economic crisis, which has been aggravated by the coronavirus (Covid-19) pandemic.
  • Meanwhile, the leader of the main opposition coalition Juntos por el Cambio (JxC) in the chamber of deputies, Mario Negri, said that the bill and the agreement with foreign bondholders will allow Argentina to resolve its current debt default and “improve access to finance for the nation, provinces, and private sector”.

Looking Ahead:

Argentina has set a deadline of 24 August to formalise the agreement with international bondholders. The agreement will then have to be approved by the legislature. Following this process, Argentina will turn its sights to reprofiling its US$44bn debt with the IMF.

In brief: Uruguay’s inflation slows in July

* Uruguay’s national statistics institute (INE) has released the latest figures for the consumer price index (IPC), according to which annual inflation reached 10.13% in July. The IPC registered a monthly variation of 0.55%. This signals a slow-down in inflation after 10.36% inflation in June and a peak of 11.05% in May, which was in part attributed to a price agreement reached in May on a number of products in the basic basket of goods, due to expire next week. Inflation remains well outside the central bank’s (BCU) 3%-7% target range.

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