Guzmán wants to renegotiate the agreement that Kicillof had made with the Paris Club

Annabella Quiroga

02/05/2020 - 15:48

• Clarín.com
• Economy
• Economy

Economy Minister Martín Guzmán announced today in Rome that he will seek a restructuring of the debt that the country maintains with the Paris Club . This is the controversial agreement that in 2014 the then minister Axel Kicillof negotiated , in which he agreed to pay all the commitments with that entity - US $ 9.7 billion - without negotiating any type of take-off. Now Guzmán says that the outstanding debt, US $ 1,923 million with a 9% rate , is "unsustainable."

The minister participated today in the seminar "New Forms of Solidarity" together with Pope Francis, the head of the International Monetary Fund (IMF), Kristalina Georgieva, and the Nobel in economics, Joseph Stiglitz.

In that context, Guzmán warned that "doing fiscal austerity to pay the debt in an unsustainable debt situation does not work, and on the contrary, it is counterproductive and makes the situation worse ."

Sitting next to Georgieva, Guzmán highlighted “ the constructive stance on the part of the IMF , in fact very constructive” and affirmed: “we are happy for that but it is not enough, we need more”.

That's when he advanced on the Paris Club. “Argentina will pay interest rates of 9% of the debt from 2020 to 2021 with the Paris Club and that is not only unsustainable but also marks a very important anchor for the rest of the restructuring . It is definitely not pari passu what we are trying to do; We understand the complexities of the Paris Club but if we are going to do things well, we also need cooperation and we need the cooperation of the bondholders, ”he said.

The Paris Club is a committee that brings together several creditor countries and negotiates with debtors how to settle their commitments. In 2001 Argentina went into default and the payments were pending until 2014, when the then minister Axel Kicillof reached an agreement. Kicillof agreed to pay US $ 9.7 billion in five years -from 2015 to 2019-. At that time that agreement was criticized because the current governor paid the entire debt, without negotiating any type of withdrawal as usual in these cases.

With the country already in crisis, the 2019 payment was made partially and the rest was pending for this year. That was possible because the agreement negotiated by Kicillof allowed to postpone payments in exchange for a penalty: raise the original 7.5% rate to 9% . In this way, what is pending is a maturity of US $ 1,923 million that the current government should face in May of this year. That is what Guzmán now seeks to restructure.

The minister seeks to frame the commitments with the Paris Club within the general restructuring of the debt , implying that the current rate of 9% marks an "anchor" too high within the negotiation with the bondholders. For the analyst Jorge Neyro, from the ACM consultancy, Guzmán’s announcement “is a way of marking the field , noting that at some point he will sit down to negotiate with them too and at the same time it is a way of telling the rest of creditors that will not validate such high rates . "

The funny thing is that Guzmán talks about "unsustainable" debt in an agreement that was negotiated from end to end by Kicillof and that he go out to do it the day after the Buenos Aires governor reversed his strategy on Buenos Aires debt. Yesterday Kicillof agreed to pay the expiration of US $ 250 million of the BP21 to avoid falling into default after the failure of its negotiation with the bondholders.

In Rome Guzmán stressed that " Argentina is suffering a deep sovereign debt crisis " and that in this situation "we see that there is a highly inefficient international financial architecture to resolve unsustainable debt situations."