09/17/2020

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Argentina Restructures its Government Debt



Reaching an Agreement with Creditors

Yesterday, Argentina announced that it will restructure $65 billion in government debt after reaching an agreement with creditors. On the news, Argentina’s $3 billion of bonds due in 2048 rose to 46 cents on the dollar—an increase of 3.2 cents.

In May, Argentina was unable to make a $500 million interest payment on foreign debt, the country’s ninth sovereign debt default in its history. After months of difficult negotiations between the Argentinian government and major bondholders, including BlackRock Inc (BLK), Greylock Capital, and Pharo Management LLC, a deal has been reached.

The Terms of the Deal

The deal will give Argentina substantial debt relief, and the amount of interest Argentina will pay its creditors will not increase. However, payment dates for some new bonds will be moved up.

The agreement comes as a relief to both Argentinian lawmakers and creditors. “It prevents a really disastrous impasse that could have locked Argentina out of credit markets potentially for years,” explained Benjamin Gedan, an Argentina specialist at the Wilson Center.

Stabilizing a Struggling Economy

Argentina is Latin America’s third-largest economy, after Brazil and Mexico. The country of about 45 million people has been facing a recession since 2018.

The COVID-19 pandemic has made unemployment, poverty, high interest rates, inflation, and other issues in the country become even more severe. However, economists, lawmakers, and investors are hopeful that this new agreement will help stabilize Argentina’s battered economy.


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