The lengthy negotiation between Argentina and its private creditors comes to a critical moment. The three large bondholders groups jointly rejected, on Monday, the last and supposedly final offer from the Government of Buenos Aires. And they presented an alternative proposal that, according to them, “represents important economic and legal concessions.” For the first time since the start of the process, in February, the main holders of dollar bonds form a block. The Economy Minister, Martín Guzmán, responded that the creditors did not understand “the restrictions that Argentina faces.”
At stake in these negotiations is the restructuring of $ 65 billion, within a global debt of around $ 320 billion and accounting for 90% of Argentina’s Gross Domestic Product. The outcome is crucial because an agreement would allow Argentina to access international credit markets; if the country remained in the default (suspension of payments) incurred since May 22, you would not have many more options than to continue financing yourself through the printing of tickets. The two Argentine currency printers currently work 24 hours a day but their production is insufficient. The Government has offered contracts to other countries to help manufacture pesos.
Hours before the three major groups of creditors (Ad Hoc, Committee, and Exchange) said the latest offer was not acceptable, the newspaper Financial Times He published an interview with Alberto Fernández in which the Argentine president stated that he could not make any more concessions. “We would jeopardize our ability to honor the commitment, and I don’t want to defraud anyone,” he said.
Minister Martín Guzmán expressed himself in similar terms after the bondholders’ proposal was published. He said that the offer he presented at the beginning of the month was “our best effort”, and explained that he could not make new concessions. “Accepting what some creditors ask for would mean subjecting Argentine society to more anguish, it would imply, for example, adjusting pensions, and we will not do it. We continue to expect good faith from creditors to prevail. ”
Ad Hoc, Comitee, and Exchange own just over a third of the debt under negotiation. A “no” on their part would prevent any type of agreement with other individual creditors, since it requires the consent of 75% or 66% of the bondholders (depending on the type of issue) for the restructuring to be valid. The three committees accept the terms and conditions proposed by the Government, but require that the extraordinary bonus with which they would partially compensate their loss of earnings yields an average of 3.4% per year, more than what Alberto Fernández and its minister Guzmán. In exchange, the committees yield in the conditions of the contract and accept for hypothetical bonds that would replace the current ones that govern the Argentine debt after 2016, instead of the stricter conditions of 2015 (applied to the bonds of the default 2001 and already restructured at least once).
The Argentine Government, and especially its Minister of Economy, remain in a delicate position. Minister Guzmán believed that he had reached a partial agreement with one of the groups, the Committee, but he is now faced with a united front. For President Fernández and Guzmán, yielding for the umpteenth time, after having assured that there was no longer any margin to do so, would entail a high political cost. When it presented its “final” proposal, the Government set the limit for negotiations on August 4 next.