Ar­gentina and cred­i­tors break dead­lock on $65bn debt moun­tain

The Daily Telegraph - Business - - Business - By Tom Rees

AR­GENTINA has fi­nally bro­ken the dead­lock in talks with in­ter­na­tional cred­i­tors and struck a deal to re­struc­ture its huge $65bn (£50bn) pile of sov­er­eign debt.

The coun­try’s bonds ral­lied af­ter Ar­gentina claimed the agree­ment with three cred­i­tor groups would pro­vide “sig­nif­i­cant debt re­lief ”, fol­low­ing months of ne­go­ti­a­tions. How­ever, an­a­lysts warned the deal was just a stick­ing plas­ter for the coun­try’s peren­nial debt woes as talks con­tin­ued with the In­ter­na­tional Mon­e­tary Fund.

The South Amer­i­can coun­try suf­fered a ninth de­fault in May, and needed to re­struc­ture its debt even be­fore Covid-19 dealt its econ­omy an­other blow. The coun­try was al­ready strug­gling with a deep re­ces­sion, surg­ing in­fla­tion and a col­lapse in the peso.

Ar­gentina will now have sev­eral years’ breath­ing space be­fore debts ma­ture, and has also cut the in­ter­est rates it pays. But an­a­lysts warned the deal rep­re­sented only a small hair­cut of 3pc on most of the bonds. The gov­ern­ment said the re­vised agree­ment in­cluded new pay­ment dates that im­proved the of­fer to cred­i­tors, which in­clude BlackRock, Ash­more and Fi­delity, but did not in­crease the amount owed. It means the coun­try will avoid be­ing locked out of global mar­kets.

But econ­o­mists ques­tioned whether it would be enough to sta­bilise Ar­gentina’s dire public fi­nances, given an­other $44bn must be re­paid to the IMF over the next four years. Nikhil Sang­hani, at Cap­i­tal Eco­nomics, said: “It is a pos­i­tive in that it avoids this mas­sive le­gal scrap that was a worry at one stage… but we don’t think this will be sus­tain­able in the medium to long term.

“We sus­pect that the IMF will pro­vide ad­di­tional fund­ing to Ar­gentina in a repack­aged agree­ment which also ex­tends the cur­rent debt re­pay­ment sched­ule.”

De­spite suf­fer­ing a less se­ri­ous virus out­break than neigh­bour­ing Brazil, Ar­gentina is still ex­pected to lurch into a deep con­trac­tion this year.

Se­bas­tian Ron­deau, Bank of Amer­ica econ­o­mist, said lock­down had hit the Ar­gen­tine econ­omy hard and warned of a 14pc plunge in GDP in 2020.

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