Economy Minister Axel Kicillof led the negotiations for Argentina (photo: Florencia Downes/Telam/dsl)
After months of negotiation, the government and the Paris Club yesterday reached an agreement over the repayment of Argentina’s US$9.7bn debt owed to the group. The deal will see the amount repaid in full in installments over the next five years.
Economy Minister Axel Kicillof met with the Paris Club leader Ramón Fernández in France to finalise the debt agreement. After the meeting, Kicillof hailed the historic deal, which is seen as a victory for Argentina, as closing a “sad chapter” in the country’s history.
The first payment, of US$650m, will be made in July, with the second payment of US$500m due in May 2015. The remaining debt installments will be managed by the government voted in at next year’s elections.
Interest has been set at 3%, and if Argentina fails to fully repay the debt over the five-year period, it the option of extending repayments for a further two years, with additional interest. The deal also allows for higher interest rates if the creditor nations invest in Argentina.
“Realisation of an initial payment under a formal commitment of Argentina to fully clear its arrears is a necessary and important step for the normalisation of financial relationships between Paris Club creditors and Argentina,” the Paris Club said.
“During the meeting, the delegation of the Argentine Republic provided a description of the economic and financial situation of its country and presented the measures implemented by the Argentine government aimed at enhancing inclusive growth and strengthening resilience to external shocks.”
The agreement allows for credit agencies from Paris Club member countries to resume doing business with Argentina, which is seeking foreign investment to develop its oil and gas industry. Referring to the deal, President Cristina Fernández de Kirchner said on Twitter: “The financing we will obtain will not be, as in previous decades, for the financial casino. It will be for infrastructure, development, technology, and all Argentines.”
News of the deal has been welcomed in Argentine markets, with the Merval rising 2.2% after opening today.
Germany is Argentina’s biggest Paris Club creditor with about 30% of the outstanding debt, followed by Japan with about 25%. Other debt holders include the Netherlands, Spain, Italy, Switzerland, and the US.
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