Argentina’s astonishing debt to the Paris Club: from helicopters that never arrived or never arrived, to a loan to a factory that went bankrupt before starting up

What is Argentina’s Debt with the Paris Club ?: A sum of unpaid credits, unfinished projects and even material that never arrived in the country explains the money Argentina owes to this group of central countries.

Perhaps the most curious fact is that of the debt for two helicopters that Argentina ordered from Britain during the dictatorship, but which never arrived due to the Falklands War. When this conflict ended almost 40 years ago, Argentina owed London $ 2 billion, which had been put on hold due to both the critical local economic situation and the decision not to pay the opponent in the South Atlantic.

Most of the credits that are renegotiated at the Paris Club are essentially guarantees of export credits from central countries to their companies, which, when they expire, are not billed due to exchange restrictions.

In particular, One of the commitments was a debt of $ 80 million for two helicopters capable of taking off from glans ships, which had been commissioned at the British plant in Westland in the late 1970s with funding from the European country.

The Westland was founded in 1915 by Sir Ernest petter but he gained worldwide fame in World War II, when he allowed the spies of the French resistance against the Nazi regime to be transported into the secrecy of the night. Although the 1982 war froze the helicopter transfer operation – and the Argentine Navy never made a claim – in Britain, the financial commitment was settled and the Conservative government of John Major He was not ready to forget it in 1990, when the two countries were negotiating the resumption of diplomatic relations.

The first head of debt negotiations under the Menem government, Carlos Carballo, was relieved when a World Bank arbitration allowed him to reduce the debt to $ 40 million, although he would later be disappointed again when he learned that the two helicopters in question had been sold for the second time. This time the buyer was the Iraqi regime of Saddam Hussein, which added them to the fleet used to defend itself, during the first Gulf War in 1991, from the coalition led by the United States and formed, among others, by Argentina.

As in this case, Most of the loans renegotiated at the Paris Club are essentially guarantees of export credits from central countries to their companies, which, when they expire, are not billed due to exchange restrictions, as explained Daniel Marx, which has negotiated several agreements with the Club.

Germany has been the club’s main Argentinian creditor for its loans granted for the purchase of weapons, telecommunications and nuclear power, among other sectors.

In 1956, the central banks of Germany, Belgium, Canada, the United States, France, the Netherlands, Japan, the United Kingdom and Sweden created this negotiating space in an attempt to jointly recover bilateral debts of underdeveloped countries..

The liquidity problems that Argentina has faced since the fall in the prices of its export products in the mid-1950s were the first case debated in this forum, which became institutionalized from 1966, when the The country’s external debt stood at USD 3,276 million. .

The Paris Club has “permanent” members representing the most important countries in the world: Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, South Korea, Holland , Norway, Russia, Spain, Sweden, Switzerland, United Kingdom and United States. There are also “ad hoc” members, who are invited for a particular discussion or negotiation. This group is made up of the United Arab Emirates, Argentina, China, Czech Republic, India, Kuwait, Mexico, Morocco, New Zealand, Portugal, South Africa, Trinidad and Tobago and Turkey.

Germany has been the club’s main Argentinian creditor for its loans granted for the purchase of weapons, telecommunications and nuclear power., among other sectors, although the most difficult positions correspond to the Netherlands for the gas pipeline managed by the Cogasco company and to Spain for a loan of USD 60 million granted to the National Development Bank (Banade) to finance the purchase of a cement plant in northwest Argentina from a company that went bankrupt before completing its task.

Since the end of the dictatorship and until the crisis of 2001, another Argentinian negotiator recalled, Horacio Liendo, there were five renegotiations with the Club: 1985, 1987, 1989, 1991 and 1992; In the latter, the previous debts have been consolidated and are falling into default. We had only amortized 10.1% in total as of December 31, 2001, ”Liendo recalled.

Previously, according to a paper written by economists Maximiliano Albornoz Yes Marcos Ochoa, Argentina signed agreements in May 1956 (the first signed by the Club); October 1962 and June 1965.

In this CECE report, it was stated that, with the exception of the last agreement – which the current governor personally negotiated Axel Kicillof when he was minister of the economy–All the previous ones (1956 to 1992) were in classical terms, that is to say with an earlier program with the IMF. This is due to the fact that the Minister did not accept the revision of Article IV – as is also currently being debated – to negotiate better terms and which forced the country to pay its debt in the shorter term and to a higher rate, which was rolled back by 64% under the government of Mauricio Macri, as the authors recall.

In the 1980s, creditors from outside Europe appeared for the first time; especially in the United States, Japan and Israel. As recalled in the report, the debt with the Paris Club remained in default between 2001 and 2014 (punitive interest increasing at an annual rate of 7.2%), until the above-mentioned renegotiation of the Kicillof.

Since the end of the dictatorship and until the crisis of 2001, recalled another Argentinian negotiator, Horacio Liendo, that there were five renegotiations with the Club: 1985, 1987, 1989, 1991 and 1992

The change in debt is not only related to the interest on each refinance, but also, as economists have pointed out Marcos Ochoa Yes Maximiliano Albornoz, to variations in currency prices. “In the case of Argentina, eight currencies are relevant when examining the debt owed (euro, yen, dollar, Swiss franc, Canadian dollar, British pound, Swedish krona and Danish krone.). Among these, the first three represented more than 90% of the total (49.5%; 22.2% and 21.5%, respectively) ”, they specified.

They also pointed out that there were two concepts included in this debt: loans granted by development agencies and those taken in the 1960s and 1970s to finance investments in public enterprises as well as nationalized private debt at the end. of the last military government.

“If you compare the last two agreements signed with the agency, that of 1992 (the last before the default of 2001) and the agreement signed in 2014, you can see that in the first there is a grace period of 4 years, while this did not happen in the last agreement. Moreover, in this one, the payment schedule was 16 years while, in the other, the payment period was barely 5 years ”, they specified.

Now, as Ochoa commented InfobaeIt is possible that there is a “political signal” from the creditor countries, since the 2,400 million dollars that Argentina owes the Club countries is a meager sum for the defaulting country. In this regard, the German government has indicated to Infobae after the videoconference that Chancellor Angela Merkel held with Alberto Fernandez that “they exchanged views on economic and regional issues and on the EU-Mercosur agreement; they also spoke of the measures to contain the pandemic ”, without giving more details.

At the same time, however, there is a need for the government to come to an agreement internally to see if it takes the necessary steps to achieve further debt refinancing, one of the issues that most divides the waters between the different factions of the ruling party. .

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