Debt with the Paris Club, countdown: how much to pay and what will happen if the government does not postpone the deadlines

In twenty days, the government will pass the first criticism of the payment agreement with the Paris Club. This will be the last date provided for in the contract signed by Cristina Kirchner’s government in 2014 to cancel outstanding balances with this consortium of creditor countries. From this moment it will start a countdown that reaches 60 days: This is the grace period that the Argentine government will have to complete the scheduled payment, which is currently around $ 2,400 million. If that did not happen, Argentina would fail this body..

The next 80 days will be decisive to avoid payment defaults, which would imply for the country not only a cost of reputation with investors, financial institutions and other nations, but would also mean a heavy economic sanction, in a context of still scarce international reserves.

The next 80 days will be decisive in avoiding payment default with the Paris Club. The first deadline is May 30 and the last is July 30.

This is part of the efforts that the president has been carrying out since Sunday Alberto Fernandez and the Minister of the Economy Martin guzman during their tour of Europe which takes them through Portugal, Spain, Italy, Germany and France. During these meetings, the head of the Palacio de Hacienda will try to negotiate changes to the contractual conditions signed by the minister at the time. Axel Kicillof.

By itself, Guzmán hopes to be able to modify the interest rates of this agreement signed in 2014. According to official documents, the debt has been updated with “Base” rate of 3% per year and 4.5% per year for balances still pending payment for each particular year.

The agreement signed by Kicillof and Argentina’s creditor countries involved the repayment of $ 9,690 million over five years, until May 2019. In total, nearly $ 5,000 million was the principal owed while the remainder (approximately $ 4,700 million) was interest on these liabilities and penalties accumulated over the years.

In 2014, when the agreement was signed, he made a first payment of 640 million USD. The following year it was 682 million USD. Already under Macrista’s 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.

Martín Guzmán hopes to be able to modify the interest rates and the expiry dates of the agreement initialed in 2014 by the Minister of the Economy at the time Axel Kicillof.

At the end of the planned first five years of the agreement, Argentina still had to 1.9 billion USD. As of 2019, the remaining $ 1.9 billion has started to be adjusted at 9% interest per annum, which the Minister of the Economy considers it too high.

But there is even another clause that could compromise the reserves of the Central Bank, in the event of activation of the event of default. As reflected InfobaeThis is a section of the original agreement that states that in the event of a default, a 9% per annum update will be applied retroactively to 2014. In this way, there would be an additional $ 2 billion to be paid to the Paris Club.s.

A document sent by Guzmán to this consortium of nations just over a year ago, the official said he would seek a change in the terms of the agreement, and even broached a proposal to change the terms, and anticipated that he intended to discuss primarily an extension of the maturity dates and a “significant reduction” in the interest rate.

The Paris Club is made up of Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, South Korea, Netherlands, Norway, Russia, Spain, Sweden, Switzerland, United Kingdom United States and United States represent around 60% of global GDP. But there is also another group of nations which act in particular negotiations, namely United Arab Emirates, Argentina, China, Czech Republic, India, Kuwait, Mexico, Morocco, New -Zeeland, Portugal, South Africa, Trinidad and Tobago and Turkey. .

Strictly speaking, 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%). Three of the countries most indebted by Argentina with this organization are part of the Alberto Fernández and Martín Guzmán tour.

KEEP READING: