Argentina’s Government, Creditors, and Local Economy

The state of Latin America’s third-largest economy was far from being ideal even before the coronavirus pandemic. Importantly, the local economy was struggling to deal with problems. On Tuesday, the country’s government made an important announcement. Based on this announcement, the government reached a deal with creditors to restructure $65 billion in sovereign debt. It took several months to reach this agreement.

The process was full of challenges. As a reminder, In June, Argentina’s government, as well as the “Ad Hoc” bondholder group, published statements regarding the deal.

It is worth mentioning that, “Ad Hoc” bondholder, consists of 12 international asset managers. Moreover, it is the largest creditor group in Argentina.

Interestingly, both sides effectively accused one another. According to the country’s government, it could not commit to the terms offered by creditors. However, the “Ad Hoc” bondholder group stated that the government was unreasonable. The group claimed that the Argentinian government was not willing to accept a comprehensive and sustainable debt restructuring offer.

Consequently, the country’s government left billions of dollars worth of bonds in default as the coronavirus pandemic created a lot of problems. Notably, Latin America’s third-largest economy fell into its ninth sovereign debt default on May 22 after it missed overdue interest payments. Moreover, at that time, the group described talks with government officials as a failure.

In the past, Argentina’s Minister of Economy Martin Guzman indicated talks with bondholders could not be resolved unless they would help the country to get back on its feet. As can be seen from the information stated above, it was hard to reach a deal.

Argentina and its sovereign debt

As mentioned above, Argentina’s government reached a deal to restructure $65 billion in sovereign debt. Interestingly, three creditor groups the “Ad Hoc” Group of Argentine Bondholders, the Exchange Bondholder Group as well as the Argentina Creditor Committee will help the country. The creditor groups will now help Argentina to restructure its debt and offer it significant debt relief.

The coronavirus pandemic is a serious threat to the local economy. Private and governmental organizations around the world are struggling to deal with the economic impact of the coronavirus pandemic. However, in the case of Argentina, preexisting problems such as poverty and unemployment, as well as soaring interest rates created a fertile ground for the pandemic.

Hopefully, the country’s government reaches a deal with creditors. As a result, the country will be able to boost its economy.