The deal should help Argentina significantly ease debt, the Ministry of Economic Affairs wrote in a statement. Creditors include major funds such as BlackRock and Ashmore.
If enough creditors join the deal, the restructuring can continue and Argentina will continue to have access to the capital market. Otherwise, the problems are likely to become even greater, as happened after the bankruptcy in 2001. At that time, there was too little support, Argentina was no longer able to enter the capital market itself and until 2016 negotiations continued with creditors who wanted more than the proposal of the government.
The deal-closing deadline was actually Tuesday, but was moved to August 24 to complete the deal.
“The fact that this uncertainty has been removed is good for sentiment in the market and provides the country with significant debt relief,” said portfolio manager Paul Greer of Fidelity International. “The country can now focus on macroeconomic imbalances and addressing the corona crisis.”
Even before the South American was hit by the corona crisis, Argentina was already on the verge of bankruptcy.
More and more debt
The country has been plagued by numerous economic problems for several years, including skyrocketing inflation. In 2018, the Argentine government was forced to apply to the International Monetary Fund (IMF) for an emergency loan of $ 50 billion.
Later that support proved insufficient and the fund agreed to increase the amount to approximately $ 57 billion. The country’s economy is expected to shrink by 10 percent this year, under pressure from the corona crisis.
Negotiations, which started as early as May after Argentina was unable to meet its payment obligations, were difficult. The government was initially prepared to pay only 40 cents per dollar. In the proposal that now lies, about 55 cents is paid. That is still lower than the 60 cents that a number of large creditors wanted to see.
In addition to Argentina, Ecuador also has an agreement with creditors to restructure over $ 17 billion in debt. Greer calls the agreement “impressive” because an agreement was concluded in record time, while the country also suffers from the corona virus.
Ecuador is also expected to turn to the IMF for a loan, and that the country is still negotiating with China to restructure Beijing-enhanced loans.