March 11, 2014
Kicillof: Paris Club talks will take ‘months’
Economy minister refuses to release details about country’s preliminary offer to creditors
One day after travelling to France to meet with the president of the Paris Club, Economy Minister Axel Kicillof threw cold water on speculation that one of the last vestiges of the country’s 2001 default could soon be resolved by saying the process could take “several months,” refusing to give any details of the general guidelines presented by the government since it could “hurt the negotiations.”
“It was a very satisfactory meeting where we presented the general guidelines, which are provisional and will be later followed by a formal offer with all the details included,” Kicillof said at a press conference yesterday. “This will be a long and hard negotiation that might take several months.”
Members of the Paris Club will meet today to carry out a first analysis of the guidelines presented by Argentina. In the following weeks, all the members will be able to submit inquiries to the government and then they will have to reach a consensus to continue with the negotiations. Only after that is complete will the government present its formal offer to the Paris Club.
“We took the first step but I can’t say we have achieved an agreement already since it’s a long process. We presented the general guidelines to pay the debt, which will be presented by the secretariat to the members of the Paris Club,” Kicillof said. “It would be unwise to give details about the guidelines since the members can submit inquires.”
The Economy minister called journalists to a press conference but he refused to give any details about the guidelines and because of that question marks remains open over the total amount of debt Argentina even has to pay to the group of creditor nations, which is estimated to be around US9.5 billion, with interest. There are also questions about a possible haircut to the debt and a supposed demand of the Paris Club that part of the debt be paid in cash.
Nevertheless, Kicillof rejected the intervention of the International Monetary Fund (IMF) in the negotiations with the Paris Club, a supposed demand of the creditor nations, and explained the guidelines are based on three main concepts that have already been regularly applied in other debt restructuring processes.
“Argentina has not subscribed to any economic programmes of the IMF and we presented a set of guidelines yesterday to the Paris Club. If those two elements are combined, the answer to a possible intervention of the IMF is clear,” Kicillof said. “The guidelines are based on three concepts: we will fulfill the commitments taken up by previous governments, solutions offered need to have sustainability and we won’t accept constraints.”
Meeting in Paris
Kicillof travelled to Paris alongside Finance Secretary Pablo López and former Economy minister Hernán Lorenzino, who is now in charge of the country’s debt repayment efforts, and met on Monday with the president of the Paris Club and head of the French Treasury Ramón Fernández.
Members of the Paris Club did not take part of the meeting and will receive the details of the guidelines today at their monthly meeting.
Created in 1956 by an initiative of France, the Paris Club brings together 19 countries — Germany, Austria, Belgium, Canada, Denmark, United Stated, Spain, Finland, France, Ireland, Italy, Japan, Norway, United Kingdom, Sweden and Switzerland — to negotiate external debts of creditor nations.
Kicillof explained Argentina holds debt with 16 of the 19 countries in the gorup and said most of the debt was taken on by the last military government. Argentina’s debt with the Paris Club is one of the last remnants of the 2001-2002 economic crisis, which culminated in a roughly US$100 billion sovereign debt default.
Achieving an agreement with the Paris Club would mean for Argentina the possibility of opening 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 expropriation 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. Because of that, the government would prefer to restructure the debt in bonds and not pay part of it in cash.
Even though Argentina is eager to achieve an agreement with the group, negotiations with the Paris Club have started since it was created and an agreement has so far been achieved yet.
In September 2, 2008, President Cristina Fernández de Kirchner revealed the government would pay the Paris Club with cash using Central Bank reserves. A decree was published in the Official Gazette in which the President ordered former Economy minister Carlos Fernández to “cancel the total debt with the Paris Club” . Nevertheless, the world economic crisis after Lehman Brothers bankruptcy meant that the order was never fulfilled.