Argentina to Repay Paris Club Debt 13 Years After Record Default
President Cristina Fernandez de Kirchner, who last year created a debt restructuring... Read More
Argentina, which has been locked out of international markets since its record $95 billion default in 2001, agreed to repay its debt to the Paris Club of creditors.
Argentina agreed on an arrangement to clear the arrears, which amounted to $9.7 billion at the end of April, over a five-year period, according to an e-mailed statement from the club, an informal grouping of creditor nations.
“This is encouraging news,” Richard Segal, a strategist at Jefferies International Ltd. in London, said by e-mail. “An agreement has proved elusive for several years.”
President Cristina Fernandez de Kirchner, who succeeded her late husband, is trying to resolve disputes with creditors as Argentina seeks a return to capital markets to bolster foreign reserves and avoid a balance of payments crisis.
Fernandez last year created a debt restructuring unit headed by former Economy Minister Hernan Lorenzino. The country is still battling holders of defaulted bonds in U.S. courts, while trying to satisfyInternational Monetary Fund demands to improve the accuracy of official economic data.
The first payment of a minimum $1.15 billion will be settled by May 2015 and another will be due a year later, the Paris Club said. The Buenos Aires-based Argentine economy ministry said in a statement that it will make an initial capital payment of $650 million in July and $500 million in May 2015.
‘Important Step’
The Paris-based group of creditors which includes Japan, the U.S., Germany and France, invited Argentina to negotiate after it received a revised repayment proposal, club spokeswoman Clotilde L’Angevin said March 14. Argentine Economy Minister Axel Kicillof traveled to France on Jan. 22 to present an initial proposal. Argentina’s foreign reserves have tumbled 27 percent in the past year to about $28 billion.
The payments are a “necessary and important step for the normalization of financial relationships,” the group said in the statement. The accord may also allow export credit agencies of Paris Club members to resume their export-credit activities, it said.
“By reaching this agreement, export credit agencies are now open for business in Argentina, which could be good news for European exporters,” Segal said.
Argentina settled $677 million of arbitration claims last year and held talks with the IMF on overhauling its statistics. The government is appealing U.S court orders to pay holders of defaulted bonds, including hedge fund manager Paul Singer, about $1.5 billion. It unveiled a new inflationindex on Feb. 13 that showed prices rising about three times as much as previously reported after the IMF censured the nation.
‘Inherited Debt’
Fernandez agreed to pay Repsol SA for a 2012 expropriation of its 51 percent stake in energy producer YPF SA. The Spanish oil company received $5 billion of bonds as compensation. Argentina is willing to resolve “inherited debt” from previous governments and was about to pay the Paris Club in 2008 before the collapse of Lehman Brothers Holdings Inc., Kicillof said Jan. 21.
The origin of the Paris Club dates back to 1956 when Argentina first met its public creditors in Paris. Since then, the grouping has reached 429 agreements with 90 different debtor countries. Since 1956, the total debt of club agreements has amounted to $573 billion.
To contact the reporters on this story: Charlie Devereux in Buenos Aires atcdevereux3@bloomberg.net; Pablo Gonzalez in Buenos Aires atpgonzalez49@bloomberg.net
To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.netAndrew J. Barden, Stephen Kirkland
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