Argentina did not pay the due date with the Paris Club: the clock starts ticking to avoid a default in July

The government did not pay this Monday the $ 2.485 million she had pending before the Paris Club seven years after the signing of the agreement initialed in 2014. The contract with the creditor countries opens the possibility of a grace period of 60 days before Argentina incurs an official default event.

The non-payment was already expected because the executive power has leaned back in recent weeks in its expectations on the renegotiation of conditions and interest rates with this body, as he did with the main European countries members of this consortium, first with the tour he led Martin guzman then directly by Alberto Fernandez.

During the seven years of the agreement with the Paris Club, Argentina paid around 8,100 million USD, although the flow of payments was halted in 2019, after the last payment made by the government of Mauricio Macri for nearly $ 1.9 billion.

The non-payment was already expected because the executive power has leaned back in recent weeks in its wait to renegotiate terms and interest rates with this body.

In 2014 during which the agreement was signed, he made a first payment of 640 million USD. The following year it was 682 million USD. Already under the Macrista mandate, the Treasury turned 1680 million USD in 2016, 1380 million USD in 2017, 1891 million USD in 2018 and $ 1,868 million in 2019. It was the last payment made by the state. From that point on, the outstanding balance – which was also $ 1.9 billion – began to be discounted with a “final” interest rate of 9% per annum.

This window of opportunity was opened because, although the initial payment period was five years, the agreement signed by the then minister Axel Kicillof He envisaged two more years of mandate, but with the particularity of having to face this interest, considered high at the time by the opposition to the Kirchnerist government and which Guzmán himself already in office discussed.

Thus, between the first default of May 2020, which Guzmán announced to Club members weeks before, and today, consolidated debt with this organization exceeds $ 2,485 million and will continue to be updated at 9%, at least until there is an agreement to change the terms. This will not happen, they know it on both sides of the negotiation, before there is a new financial program signed with the IMF.

From the Casa Rosada, they ensure that now the ball is on the side of the Monetary Fund. Along with negotiations with European leaders, Guzmán – then Fernández – began excellent work with the technical staff of the Monetary Fund to reconcile positions, even far from the possibility of having a closed program in the short term.

What the executive power would need, in any case, would be some sort of “Blessing” to ongoing conversations on the way to a deal that will help the Paris Club soften its stance and not consider July 30 that the country defaulted on debt.

The consolidated debt with this organization exceeds $ 2.485 million and will continue to be updated at 9%, at least until there is an agreement to change the terms.

The reading they give to the government is that it wouldn’t be a matter of breach of contractRather, the Paris Club is a “special” multilateral organization, which is guided more by the geopolitical waves of each moment than by the letter engraved in stone of the agreements.

More than half of Argentina’s debt to the Paris Club is concentrated in two countries: Germany (37%) and Japan (22%). Further back they follow Holland (almost 8%), Spain (6.68%), Italy (6.29%) and United States (6.28%).

Between self-criticism and change of internal parts, the IMF analyzes if this will help Argentina

The shock wave of chord failure Be ready that the International Monetary Fund signed with Mauricio Macri’s government in 2018 forced the organization to spare parts among management positions. August 31st will be the last working day for Alexander Werner, still director of the Western Hemisphere Department and one of the officials most involved in this initial negotiation with Argentina.

Thus, it was added to the previous releases of Christine Lagarde as general manager, who has given way to Kristalina Georgieva, his second David Lipton in February 2020 and Roberto Cardarelli, who was moved from his post as head of the Argentine mission and was replaced by Luis Cubeddu. Werner, in fact, had already been excluded from the discussion table with the current government and his place was occupied by his deputy director, Julie kozack.

With Lagarde and the head of the technical team Roberto Cardarelli, were the three visible faces of these months of coming and going between the start of negotiations in May 2018 and the announcement of the second agreement in September of the same year, three months after the failure of the first financial program.

What the executive branch would need would be some sort of “blessing” from the IMF to ongoing talks in the middle of the road to a deal that will help the Paris Club soften its stance.

With the change of government in 2019 and the announcement of debt restructuring with the IMF, faces have changed on both sides of the table, both among Argentinian officials and IMF leaders. Kristalina Georgieva left her post at the World Bank to take on the general management, while Lagarde became president of the European Central Bank..

For his part, Roberto Cardarelli was moved as head of mission and replaced by Luis Cubeddu. Cardarelli currently continues at the Monetary Fund as head of the technical team that negotiates with the Moroccan government.. More, Lipton stepped down in March 2020 and is currently working as a consultant to the United States Department of the Treasury..

But the IMF’s internal quake didn’t stop with the coin swap. Recently, the body launched a dual internal review process on the performance of civil servants during the signing of Stand By 2018, which ended up being the largest loan in the history of the institution.

On the one hand, the technical staff themselves write an Ex Post report and this is generally done for all credits whose amounts exceed the initial quota. This study was launched at the beginning of the year but has no publication date, as explained at the time by the spokesperson for the Monetary Fund, Gerry Rice.

Recently, the agency began a dual internal review process on the performance of civil servants during the signing of Stand By 2018, which ended up being the largest loan in the history of the institution.

A second way of self-criticism will be the report prepared by the Independent Evaluation Office (OEI) of the IMF, which is an autonomous office that analyzes the mistakes and successes of the agency’s performance in negotiations and programs with different countries.

In this context, the IMF must now decide whether he will offer a “lifeline” to the government to avoid the default with the Paris Club. Washington denies that there is a mission of technical staff to Buenos Aires on the imminent agenda of the organization, a visit from which could come this nod that the Casa Rosada expects.

It would not be the first time that IMF support has helped Argentina continue the process of debt restructuring. In the ruling party, they remember this IMF statement in which IMF staff considered Argentina’s debt “unsustainable” and which served as a starting point for discussions with private creditors.

Criticism of the opposition to Kicillof for the “ruinous” agreement

The deal Kicillof signed with members of the Paris Club in 2014 drew criticism from the opposition at the time (which was even made up of leaders who ended up being part of the Front de tous) at the time of the signing. and thereafter years.

Without going any further, this Monday the former Minister of Finance and Finance Alfonso Prat Gay He questioned on Twitter the terms of the agreement signed by the current governor of Buenos Aires. “Today, Kicillof’s ruinous deal with the Paris Club expires: the most expensive sanctions, the shortest duration and an additional sanction of $ 900 million at the end of these 60 days of grace One of the many debts that Kirchnism has left Juntos por el Cambio ”, he declared.

The former central bank chairman also supplemented his social media post by stating that “while Cambiemos has paid nearly $ 7 billion in principal and interest, The Frente de Todos increased its debt to the Paris Club by $ 2,800 million ($ 2,300 million with CFK and $ 500 million with AF). But for CFK, they only get debt! », He closed.

In the same vein, the legislator of Buenos Aires wrote Gabriel Solano, of the Left Front, which assured that “it should be remembered that it is Kicillof, as Minister of the Economy of the CFK, who renegotiated the debt and increased it from $ 6,706 million to $ 9,690 million, admitting confiscatory sanctions. Yes, $ 3 billion more, ”he tweeted.

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