BUENOS AIRES – Argentina lost a bond payment on Friday and approached yet another crushing default, plunging it into a new period of economic isolation and deepening a recession that has been exacerbated by the coronavirus pandemic.
The missed deadline means that Argentina has technically gone into default for the ninth time in its history. But the government said it was moving toward an agreement with creditors to restructure $ 66 billion in foreign debt and announced that negotiations would continue until June 2.
President Alberto Fernández played down the late payment and said that the government would not accept an agreement that deepens the economic pain for Argentines who have seen their purchasing power decimated by the pandemic.
"I want the world to see us as an honorable country that lives up to its commitments," he said in a speech Thursday night.
The last time Argentina defaulted on its debt was in 2014, and its long history of spending beyond its means and default on loans has given it a reputation for being worthless. But his current efforts to negotiate an advantageous debt restructuring have been widely supported by prominent figures such as Pope Francis and Massachusetts Senator Elizabeth Warren, a lawyer and renowned bankruptcy and business law expert.
"With Covid-19 worsening an already weak economy, this is not the time for Wall Street creditors to exploit any country struggling to cope with the debt burden," Warren recently wrote on Twitter. "A fair deal will help save more lives."
A group of 138 economists, including Nobel laureates Joseph Stiglitz and Edmund Phelps, signed an open letter urging Argentina's creditors to reach an agreement with the country with liquidity problems. The International Monetary Fund has also expressed optimism about the negotiations to restructure Argentina's debt, which it has described as "unsustainable,quot;.
Argentina's economy minister Martín Guzmán, who leads the negotiations, expressed optimism that the country would avoid prolonged default.
"Argentina is conducting constructive negotiations with its creditors," he said in an email. "The positive of all this is that there is a willingness on all sides to seal an agreement, now the agreement must be an agreement that is sustainable."
Hans Humes, the C.E.O. of Greylock Capital Management, who is involved in the negotiations, said Thursday during a round table organized by the Wilson Center that the consequences of Argentina falling technically into default on Friday would be minimal in the short term.
"There should be enough flexibility to reach an agreement that is acceptable," he said, sounding optimistic about the ongoing negotiations.
The government's initial offer to creditors, which was flatly rejected, required a three-year grace period for future payments, a 5.4 percent reduction in the loan balance, and a 62 percent cut in loan payments. interests.
Initially, Argentina offered to pay around 40 cents on the dollar, while creditors demanded 60 cents. Analysts say the two sides appear to be closer to accepting a midpoint between 50 and 55 cents.
Argentina's economy, which has been in recession for more than two years, took a major hit after the government imposed a strict shutdown in mid-March to curb the spread of the coronavirus.
Analysts said there would be no significant consequences for Argentina if Friday's deadline is not met.
"A mild default doesn't seem like such a negative scenario compared to what we're dealing with today," said Todd Martinez, an Argentina expert at Fitch Sovereign Ratings Group. "In practice, there are not many changes, although it may have some psychological impact."
But if the talks fail in the coming days, Argentina will face a new and long period of economic isolation and contraction.
"If it spans an extended period of time, it is when you will begin to see difficulties in accessing credit for companies and individuals, as well as complications in the exchange market and inflationary pressure," said Daniel Marx, former finance secretary who heads Quantum Finance. , a consultancy.
Although polls show that Argentines would prefer not to default, the issue has not dominated the news in recent days.
"I'm not really following him," said Victoria Ferreira, a 37-year-old local manager. "I prefer to worry about the things that I can solve." Living in Argentina, he added, means that there is always "a context of uncertainty."