The Government agreed with the Paris Club to defer debt payments until September 30, 2024. As part of the understanding on which the Minister of Economy, Martín Guzmán, is working, a new mechanism for repayment of commitments is contemplated. DNU 286 was published this Tuesday.
Payments are deferred until the end of September 2024 or until a new agreement is reached with the creditors of that group of countries, “whichever comes first,” says the text of the decree signed in a general agreement of ministers.
The DNU is published when the previous “time bridge” expired, reached last March, and will give more time for the Ministry of Economy to negotiate with the Paris Club the new conditions of interest rates, terms, and incorporation of the US$430 million already paid in two payments in February 2022 and July 2021, according to information from the Télam agency.
In addition to the term until 2024 to continue negotiating, the Government undertook to make partial payments to some 40 public institutions from various creditors (Spain, United Kingdom, USA, Germany, among others) in “an amount equivalent to that made in the framework of other bilateral commitments with third states ”, such as with China.
More time for a new agreement with the Paris Club
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Beyond the maximum technical term of negotiation until 2024, Guzmán will seek to close a technical understanding for the restructuring of the debt for US$2.2 billion in the coming weeks. As TN learned, contacts with the agency have already begun and the intention is to announce it before the end of June.
It seeks to start paying only in two years and get a considerable drop in the interest rate, between 1.5% and 2% maximum, which so far is 9% per year.
After the agreement with the IMF last March, which was a condition to advance the restructuring with the Paris Club, Guzmán traveled to France to seek refinancing of what was owed to that organization.
What is the Paris Club?
The Paris Club, an entity that is key in the history of Argentina’s indebtedness, defines itself as an “informal group of creditors”, among which are included many of the most powerful countries on the planet and that also make up the board of directors of the International Monetary Fund (IMF). Failure to comply with scheduled commitments with this body means falling into default. The 22 countries that comprise it currently represent approximately 60% of the world’s GDP. For particular discussions or negotiations, other countries may participate as guests, including Argentina.
In 2014, the then Minister of Economy Axel Kicillof recognized a debt of more than US$9,000 million, without removing capital or punitive interest, which the country undertook to pay in five annual installments, the last in 2019, with two more years of the term.
The credit should have been canceled in May 2020, but with the coronavirus pandemic declared and with the negotiation with private creditors, Argentina announced that it was going to make use of the extension for one more year to pay the last installment of US$2.4 billion.
In February, Argentina made the last payment for US$190 million, as part of the agreement reached in the middle of last year, for which it had already made another disbursement for US$226 million in July, both on account of the capital of the total debt of US$2.4 billion that the country had to pay on July 31, 2021.