March 10, 2014
Kicillof outlines debt offer to Paris Club
Creditor nations still wait for the formal proposal to repay one of the last vestiges of default
Argentina yesterday outlined its conditions for repaying some US$9.5 billion in debt to the Paris Club, a senior official at the group of creditor nations said, as the country seeks to revive long-stalled talks.
The Economy Ministry led by Axel Kicillof issued a statement saying the meeting “consolidated the possibility of advancing negotiations.”
Kicillof sketched terms for a formal repayment offer in talks in Paris with Club President Ramón Fernández, its secretary general Clotilde L’Angevin said.
“It’s not yet a formal proposal, they are main principles that could serve as the basis for a proposal,” she told Reuters, adding that the Club’s members would discuss the talks at a regular monthly meeting tomorrow.
“It’s not yet a formal negotiation process, the discussions between Argentina and the Paris Club are part of an ongoing process,” she added.
With Argentina signalling it wants to settle disputes with its creditors, Paris Club members have been eager to get a concrete proposal for the debt to be repaid over a period of time to be determined in negotiations.
Paris Club members Germany and Japan together hold about 60 percent of the outstanding debt to the group of creditor nations.
Monday in Paris
Kicillof had arrived to Paris on Sunday alongside Finance Secretary Pablo López and former Economy minister Hernán Lorenzino, who is now in charge of the country’s debt repayment efforts.
The official was also joined by former Finance secretary and current member of the Debt Restructuring Unit Adrián Cosentino.
Any negotiation with the Paris Club must respect the country’s national interests and its ability to pay, Cabinet Chief Jorge Capitanich told reporters during his daily news conference.
“This is the basic condition for negotiation the country has, and that is the position the minister Axel Kicillof will establish,” Capitanich said.
Capitanich suggested that Argentina’s capacity to repay foreign debt would improve after big payouts already planned for this and next year. The country’s debt payments would reach US$5.5 billion this fiscal year and slightly more next year before the burden eases in from 2016 to 2019, the Cabinet chief said.
However, official sources tried to play down expectations that the official will return from Paris with a signed deal, newspaper Ámbito Financiero reported.
New sources of funding
The Paris Club wants to be reimbursed in full in order to avoid creating a precedent for other countries that owe its members money.
For its part, Argentina wants a breakthrough deal with the group of sovereign creditors because it needs to open up new sources of international funding after being shut out of capital markets for more than a decade since its default.
Argentina is largely locked out of international bond markets as the country awaits a final ruling in a case against a number of hedge funds that are suing Argentina in US courts for full repayment on defaulted sovereign bonds.
The Cristina Fernández de Kirchner administration has recently taken steps to mend ties with international creditors. Months ago, the country paid about US$500 million to settle disputes with five investors and started talks with Spanish oil firm Repsol to compensate it for the expropiation of its majority stake in YPF, the country’s largest oil company.
With foreign-currency reserves of the Central Bank (BCRA) at their lowest since 2006 and falling quickly, the country wants a deal with the Paris Club that does not put too much strain on its balance of payments.
High inflation and falling confidence have driven the peso currency to new all-time lows this month.
Argentina’s Paris Club debt is one of the last remnants of the 2001-2002 economic crisis, which culminated in a roughly US$100 billion sovereign debt default.
Argentina is eager to renegotiate the terms of what it still owes to the group — around US$10 billion if late interest and penalties are included — after it stopped servicing the debt as part of its massive default in 2002.
However, Argentina’s dealings with the informal group of mostly Western nations date back to the Paris Club’s origins in 1956, when the country agreed to meet its public creditors in the French capital.
— Herald staff with Reuters