Government to send debt bill to Congress ahead of crucial talks

The government will send a bill to Congress outlining its plan to address the debt crisis and make payments “sustainable,” Economy Minister Martín Guzmán said Tuesday.

"We have a debt burden that is unsustainable," said Guzman at a press conference in Buenos Aires, asking creditors for "time" and "good faith."

The minister said Argentina was unable to pay down its debt under current conditions and would have to either alter maturity dates, interest rates or outstanding capital amounts. Exact details of the proposal will have to wait, he said, though the bill will cover foreign law bonds as well.

"The willingness is to pay is, we have always said so. But in order to pay, the country needs to generate capacity, and for that we have to grow, and for that it is essential that there is a relief of the debt burden," the minister told reporters. “We are taking firm steps to achieve that, but we don’t want to make promises that we cannot keep.”

The bill is a first step in Argentina’s efforts to restructure billions of dollars in bonds and loans with private creditors and the International Monetary Fund (IMF). Guzmán and President Alberto Fernández have have yet to unveil details of their strategy to renegotiate the debt, although Fernández recently said he wants talks to wrap up by March 31 because debt payments balloon after that date.

Speaking at the World Economic Forum in Davos earlier on Tuesday, economist Joseph Stiglitz said investors should brace for “significant haircuts” in Argentine debt. The Nobel laureate was Guzmán’s mentor at Columbia University.

Fernández, who took office on December 10, has inherited a public debt of some US$335 billion, the equivalent of 93 percent of the Gross Domestic Product (GDP), including a huge US$44-billion loan from the IMF.

Criticism

Guzmán offered a sharp critique of the previous government's approach to debt, criticising officials who worked under ex-president Mauricio Macri.

Addressing previous economic policy, Guzmán said former Central Bank chief Federico Sturzenegger, and ex-finance minister Nicolás Dujovne did not achieve any of the objectives that had been announced by Macri administration.

"They only increased the debt very much and not productive capacity, it generated a drop in demand that strongly affected the internal market, and there was a brutal increase in the interest rate, which destroyed companies. It's clear that this is not going to happen," Guzmán declared.

"Today the relationship is different. We're in control. This is a programme designed and executed by us. And we will not allow any conditionality. The programme agreed by the previous government was a resounding failure," stated the national official during a press conference at the Palace of Finance.

Provincial debt

The government won’t offer a bailout to Buenos Aires Province, which has US$250 million in debt due on January 26, Guzmán confirmed. He asked creditors to show good faith by agreeing to a delay in order to give time for broad negotiations.

The province, now led by Governor Axel Kicillof, has asked bondholders to answer by January 22 whether they agree to postpone the capital payment until May 1. At least 75 percent of bondholders must agree.

“We are maintaining our position that it doesn’t serve anyone’s interest to bail out the province. But the nation and the province are not in a position to pay the maturities,” Guzmán said.

"We are asking the same good faith and responsibility that the Argentine government and the province of Buenos Aires are having from the bondholders. We are asking that they give us the necessary time to solve a problem of macroeconomic collapse that has affected the whole country," he added.

Argentina’s century bond due 2117 is trading at 47 cents on the dollar, while the province's bonds due 2021 are trading at 57.3 cents on the dollar.

– TIMES/BLOOMBERG/NA/AFP