In a virtual chat with the Council of the Americas, the minister reviewed the challenges of the economy, the fiscal deficit and the debt path.
The Minister of Economy, Martín Guzmán, promised to keep under control the fiscal deficit that the government is rapidly incubating and confirmed that the obstacles to debt restructuring have to do with legal terms that investors are not willing to accept in the new bonds to be issued.
Guzmán participated in a webinar organized by the Americas Society / Council of the Americas and presented by Susan Segal, where he reviewed the challenges facing the Argentine economy amid the pandemic of the COVID19 and how debt restructuring is taking place.
“The deficit is growing and this year we are in a very difficult situation because now we are restructuring the debt. But there will be measures to keep it under control and at the same time we can help those who are ill due to the pandemic of the COVID19“said the minister, in his presentation.
The minister said the BlackRock-led group is the toughest against the country.
At the same time, Guzmán pointed out that before the pandemic the country had a fiscal path that indicated that from 2023 the accounts would stabilize, and that despite the fact that this year’s numbers will be quite different from those previously estimated – obviously due to more deficits – it maintains the idea of achieving fiscal consolidation .
Regarding debt, the Economy Minister He pointed out that reaching an agreement will be important, precisely, to have a tolerable debt threshold that is consistent with a fiscal number according to what Argentina can hold. “Doing this well means that you have to have the support of society and the international community. COVID It affects the logistics of the swap because it is not face to face, everything is more difficult when negotiating, “he said.
On the other hand, Guzmán said that the group Ad hoc where is it BlackRock he is the hardest and affirmed that “they do not do their part”. “Hopefully we have a good agreement. But part of the lack of agreements has to do with the legal terms. The creditors want there to be another treatment and that would put the progress of recent years in vain. We cannot do that,” he said in the talk with the Council of the Americas.
What is discussed is the legal aspect of the transaction. Something not less since the country wants to change – obviously for the worse – the conditions for the bondholders. Argentina proposes to maintain the conditions -indenture- of 2005 for holders of the Discount and Par bonds, but now the largest committee led by BlackRock requires that all new bonds be issued with Indenture 2005, eliminating the one in 2016.
Guzmán said a new agreement with the IMF will take a long time.
Neither days nor weeks
Thus, they want the collective action clauses – that is, the government’s mechanism to drag bondholders who do not want to accept past a certain minimum of accession – to be the most beneficial for creditors, something about which Guzmán has just confirmed that they do not give in to. In addition, the minister kept up his sleeve the possibility of reallocating titles to reach majorities of bond series and thus force acceptance, things that creditors are asking to be eliminated.
Hence the biggest problem and the part of the negotiation. As the government of Alberto Fernández wanted to include the reallocation in the conditions of the bonds that were changed in 2016 – when the government of Mauricio Macri placed debt to pay the holdouts – now the bondholders are asking to go directly to the ultra-hard legal terms of the exchange of 2005.
Surely this will be part of the negotiation going forward, that is, maintaining the standard conditions that Argentina added in 2016 without making use of the reassignment, a trick that Guzmán made happen and that generated tension in the bondholders.
“We hope to continue maintaining contacts with the creditors. And we hope to reach an agreement. It is our intention after the negotiation with the bondholders to enter into the negotiation with the International Monetary Fund for a new program. A new agreement with the Fund will take time, not days or weeks. We expect a similar process to the one we have with private creditors, “Guzmán said.
Finally, amid the questions of the partners of the Council of the Americas who joined the talk -about 400 people were online listening to the Economy Minister-, they asked him about a topic that was stinging for the Government, such as the idea of expropriating Vicentin.
Guzmán noted that as the President said, “we are open to any solution that satisfies the rescue.” When explaining what happened to Vicentin, the minister said that “what happened was a company that took on more debt and a context of double crisis due to the pandemic. Furthermore, the market cannot help it. It was a market failure problem. But, we are open to alternatives “he remarked.
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