Argentina faces deadline to pay the Paris Club without an agreement yet

RIO DE JANEIRO, BRAZIL – Argentina is facing the end of the deadline to pay off all its US$2.4 billion debt with the Paris Club without having reached a refinancing agreement yet, but the Government of Alberto Fernández is confident that it will move forward with the negotiations to avoid a default.

The deadline expires this Monday and, if the debt is not settled before the 60-day grace period ends, the forum of 22 countries could declare the South American nation in default.

However, the Fernández government, which has repeatedly insisted that Argentina, in a severe recession for the last three years, is not in a position to meet its payments to the Paris Club and the International Monetary Fund (IMF), is confident of advancing in negotiations that will allow it to avoid a “default” and has recently received important support from world leaders.

“Negotiations continue within the stipulated time until the end of July”, official sources told Efe this Sunday.

Argentina’s current debt with the Paris Club comes from a payment agreement sealed with that group in 2014, during the government of Cristina Kirchner (2007-2015) when the maturities that the country had pending after falling into cessation of payments at the end of 2001 were renegotiated.

The 2014 agreement established a five-year payment period until May 2019, which could be extended for two more years.

A year ago, the Fernandez government asked the Paris Club to negotiate an extension of the maturity dates and a “significant” reduction of the interest rate. Still, so far, no understanding was reached.

Specifically, the forum of creditor countries has among its conditions for granting a debt restructuring that the requesting country has a current program with the IMF, something that Argentina, which seeks to refinance debts with that organization for some US$ 45 billion, has been negotiating since last year and has not been able to reach so far.

Argentina’s main creditors in the Paris Club are Germany, Japan, Holland, Spain, and Italy.

SIXTY-DAY GRACE PERIOD

The 2014 agreement establishes that if Argentina “fails to comply with the stipulated payments”, the forum “may publicly declare, as of 60 days” after the due date, that Argentina “is in default with respect to its Paris Club creditors”.

Within this “grace period”, the Fernandez government is betting on obtaining a pact with the IMF that will serve, in turn, as a guarantee to reach an agreement with the Paris Club or, at least, some audit of Argentina’s accounts by the Fund that will allow it to give a signal to the forum of creditor countries that the talks with the IMF are firmly on track.

To this end, the Argentine Minister of Economy, Martin Guzman, who is leading the negotiations, and Fernandez himself have appealed to “diplomacy” in search of support from countries with weight in the IMF -where decisions are made by majority vote- and the Paris Club -where decisions are made by consensus-.

To this end, two weeks ago, Fernández made a tour of Europe, where he met, among others, with the Presidents of Portugal, Marcelo Rebelo de Sousa; of the Spanish Government, Pedro Sánchez; of France, Emmanuel Macron, and Italy, Sergio Mattarella, and the Prime Ministers of Portugal, António Costa, and of Italy, Mario Draghi.

Fernández also met on May 14 in Rome with the managing director of the Fund, Kristalina Georgieva. She reiterated her “vocation is to find an agreement as quickly as possible”, but without demanding “greater efforts from the Argentine people”.

To this was added last Wednesday a videoconference with the German Chancellor, Angela Merkel, who, according to the Argentine Presidency, committed “together with Spain, Portugal, Italy and France”, to “continue supporting Argentina to find a sustainable agreement with the IMF”.