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Thu Apr 16, 2020, 10:15 PM

Argentina makes opening move in debt talks

Argentina unveiled a proposal for a new debt restructuring today on some $70 billion in sovereign bonds.

The proposal, announced by Economy Minister Martín Guzmán, includes a three-year moratorium on debt service, a 62% reduction in interest payments, and a 5.4% cut in the value of the principal.

Final details were scheduled to be divulged Friday, effectively marking the beginning of what stands to be a contentious negotiation process between the two sides.

The recovery value implied by the proposal is about 30 cents on the dollar. That would be in line with the 70-75% "haircut" investors accepted in the last major restructuring in 2005 - after its then-record 2001 default.

Investors, Guzmán said, will have 20 days from the formal offer to accept the terms. Some, he revealed, expect 60 cents on the dollar from the center-left government of President Alberto Fernández.

Fernández, who took office in December, inherited twin economic and debt crises from his right-wing predecessor, Mauricio Macri.

The country's foreign currency-denominated public debt rose 141% in Macri's four-year tenure to $209 billion - with $34 billion owed to private and foreign creditors this year alone.

Argentina's GDP likewise fell a total of 6.6% since the "Macrisis" began in early 2018, as inflation more than doubled to 54%.

The ongoing Covid pandemic prompted Fernández to enact a nationwide stay-at-home order for non-essential staff on March 20, which has deepened the recession.

Even with stimulus - worth $11 billion thus far - the IMF estimated that Argentina's GDP may fall by another 5.7% this year.

At: https://www.bloomberg.com/news/articles/2020-04-16/argentina-asking-for-62-haircut-on-interest-payments

Economy Minister Martín Guzmán announces Argentina's preliminary debt restructuring proposal as Vice President Cristina Kirchner, President Alberto Fernández, Buenos Aires Mayor Horacio Rodríguez Larreta, and House Speaker Sergio Massa look on.

The mayor's use of a face mask dramatizes the ongoing Covid pandemic - which has hit Argentina's economy hard since a national stay-at-home order was issued on March 20.

Guzmán's restructuring proposal, the most far-reaching since a historic 2005 restructuring, is supported by the IMF - which agrees that Argentina's foreign debt is "unsustainable."

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Reply Argentina makes opening move in debt talks (Original post)
sandensea Apr 16 OP
Judi Lynn Apr 17 #1
sandensea Apr 17 #2

Response to sandensea (Original post)

Fri Apr 17, 2020, 12:33 AM

1. It took a courageous person to decide to step in, knowing what a profound wreck Macri had created.

Macri and his cronies incurred a ferocious moral, ethical debt against the people of Argentina. What they did was unforgivable. It's hard to image what could have been left of Argentina had he won a second run at the country.

It sounds as if President Fernández, with Economy Minister Guzmán have arrived at a solid plan, and it's valuable learning the IMF supports it.

What a time for the pandemic to manifest itself in Argentina. Really hoping they will find the right attack that will get them through this treacherous passage with the least damage. It was easy as pie for Macri and his brethren to stuff their pockets and offshore accounts before leaving this calamity behind them.

I wish I understood economics as well as I'd like, because I have almost no ability to grasp the elements of this situation, but I know there ARE people who'll see your post and easily recognize how it all fits together.

This situation is more severe than anyone should have to fix, and the slicksters who did it have walked off, smirking, to their next colossal scam, or simply to live out their years on their massive haul from Argentina, the country which their own fathers and other relatives bled dry before them, during the right-wing military dictatorship.

Thank you for this great information showing they are close to launching their program. We wouldn't have known without your help!

Very best wishes every day to President Fernández.

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Response to Judi Lynn (Reply #1)

Fri Apr 17, 2020, 12:50 AM

2. Thank you, Judi. What a trying time for all of us, surely.

They are indeed fortunate that Signore Macrě isn't still in office:

You'll recall that he had demoted the Health Ministry to a sub-cabinet 'secretariat' - and didn't even have a Health Secretary by the time he left! (Dr. Rubinstein - one of his better picks - had resigned in protest).

They're still finding health equipment that had been purchased but never used for lack of funds: in this latest case, a fleet of 24 ambulances.

They've just now been refurbished for immediate use in the Greater Buenos Aires area - the 30 counties surrounding Buenos Aires, whose 10 million people between them are often among the most underserved communities in the country.

Ready to go: 24 ambulances - bought in 2017 but never used for lack of funds - have just been refurbished for use in the Greater Buenos Aires area.

Unlike the relatively prosperous city of Buenos Aires, the 30 counties in the surrounding GBA have some of the highest poverty rates in the nation as well as strained health resources.

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