Paris Club: creditor countries push for government to speed up agreement with IMF

Finally, Argentina did not pay the $ 2.4 billion deadline that would have canceled the debt renegotiated in 2014 with the Paris Club. Now, a 60-day grace period stipulated in the original agreement opens, in which the government has two options: pay in late July or get an extraordinary refinancing to avoid default.

Deferring the payment of this debt is not easy. The unanimity of all the creditor countries that make up the Paris Club is required. The turn of Martin guzman and then that of Alberto Fernandez for Europe he tried to soften positions to achieve this voluntary restructuring. But for the moment, no concrete results are in sight.

Some countries like Portugal, Spain, France and Italy were more inclined to help Argentina avoid default. However, the toughest positions would be those of Germany and Japan.

What the toughest countries ask, before granting the country a new payment deadline, is that the government advance in an agreement with the IMF. It is materially impossible to reach an agreement in less than 60 days when formal negotiations have not even started. Therefore, there should be at least a document from the agency indicating that this process has at least started.

Germany and Japan would be the countries most reluctant to grant Argentina the refinancing of the debt of 2.4 billion dollars. For this, they demand that the country formally commit and move towards an agreement with the IMF. But Guzmán’s room for maneuver to move forward is very narrow in the midst of the electoral process.

A report drawn up by the brokerage firm TPCG told investors that this situation exposes Martín Guzmán like never before. From now on, we will know with much more certainty whether the Minister of the Economy really has support for negotiating with the IMF or the pressure of hard Kirchnerism forces him to continue to postpone this stage until after the legislative elections.

Of course, continuing to delay definitions of an economic program, which the Monetary Fund is actually asking for a new deal, is not free.

Sometimes not sitting down to negotiate with the IMF would result in millions of fines with the Paris Club. When Argentina restructured for the last time with its constituent countries, it accepted a variable rate between 3 and 4.5% per year. But also a penalty rate for arrears of 9% per year in dollars. El problema es that si el programa cae en mora, esa tasa de penalización del 9% apply retroactivamente desde 2014. La cifra involucra una cifra millonaria of USD 2,000 million, resulting from the difference between el interés pagado y el interés adeudado durante los últimos seven years.

For Guzmán, it is difficult to move, especially since there are less than 100 days before the primary elections, which this week would be set for early September. Hard Kirchnerism seeks to put limits on future negotiation, as happened last week with the “May 25 Proclamation”, in which it is basically proposed to stop paying debt with the Monetary Fund. Therefore, the idea of ​​some sectors is directly to “kick the board” and not to pay the debt of more than 4000 million dollars which expires with the agency.

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