Economy

In an interview with FT about Argentina's $65 billion debt, Fernández tells ‘we can’t do any more’

This new proposal 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

Argentina's President Alberto Fernández.
Argentina's President Alberto Fernández. Photo: Pagina12/Screenshot
  • This new proposal 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;
  • According to FT, Fernández denied bondholders’ demands for additional ‘sweeteners’ before an August 4 deadline to accept one of the emerging market world’s biggest restructurings.

This Sunday the Financial Times has published an exclusive interview with the Argentine President Alberto Fernández about the country’s negotiation to pay its $65 billion debt. He said that Argentina‘s last offer to creditors, made at the beginning of this month, is the best that the Latin American country can do at the moment.

READ ALSO: Argentina’s GDP falls 5.4% in the first quarter

This new proposal 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.

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.

According to FT, Fernández denied bondholders’ demands for additional ‘sweeteners’ before an August 4 deadline to accept one of the emerging market world’s biggest restructurings.

READ ALSO: Argentina, Brazil, and Mexico to participate in the WHO vaccine financing program

Described as a “pragmatic leftist” by the newspaper, Fernández stressed that, with an economy devastated by the new coronavirus pandemic, Argentina needs a swift resolution of the debt as a way to recover its place as one of the top global grains exporters. For him, a “pick-up next year in international demand for Argentina’s grains exports from countries like China would power a recovery in 2021 after a “very big fall” this year”.

This recovery path, said the Argentine President, would be aided by subsidies, public works and housing projects. But as pointed out by the newspaper, economists fear that Fernández’s plan “will be financed simply by printing new money, further fuelling one of the world’s highest inflation rates.”

READ ALSO: Decolar, Brazilian subsidiary of the Argentinian Despegar, shows signs of recovery

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.