- In April, Argentina had suggested paying interest from 2023, but now in the new offer, the country proposes to do so from September 2021, and thereafter, every six months;
- Another point of the new offer that should please creditors is the interest on the debt as a whole.
Over the weekend, Argentina announced a new offer to holders of its $65 billion foreign debt. This is the country’s fourth attempt to reach a debt settlement.
This new proposal, according to the newspapers Financial Times and Clarín, suggests a recovery value of approximately 53 cents per dollar, an 37% increase from the previous proposal of nearly 40 cents per dollar made on April 22.
In a radio interview on Sunday, President Alberto Fernández described the offer as the “maximum effort” that Argentina can make.
Another difference from the new proposal is the grace period for the payment of the debt’s interests. In April, Argentina had suggested paying interest from 2023, but now in the new offer, the country proposes to do so from September 2021, and thereafter, every six months.
Another point of the new offer that should please creditors is the interest on the debt as a whole. In general, the simple average of the interest rates increased from 2.9% in the first offer to 3.5% In the latest counterproposals from the bondholder’s groups they ask for a little more, between 3.6% and 3.9%.
In June, in an interview with Valor Econômico, Argentina’s Economy Ministry Martín Guzmán said that the country can’t pay the main part of the debt with the International Monetary Fund (IMF), even if an agreement is reached with private creditors to restructure its foreign debt. As pointed out by FT, the IMF has backed Fernández so far, publishing analysis that reinforced that Argentina cannot improve is currently offering.
Argentina has been technically in recession since the second quarter of 2018. In that year, the fall in GDP was 2.5%. Prior to that, from 2012 to 2018, the economy grew by 0.5%. The scenario is really complicated. The country’s debt amounts to over $ 300 billion–a figure the government says equals almost 70% of the country’s GDP, while rating agencies say it is almost 100%.
This debt needs to be paid not only to calm investors but for the country to obtain resources already negotiated with the IMF itself in order to resume its investments and its economy.