Argentina in talks for US$2-billion loan backed by World Bank

Argentina is negotiating a US$2-billion loan with private banks backed by guarantees from World Bank institutions, according to two people with direct knowledge of the matter. 

Talks are led by Economy Minister Luis Caputo, who is in Washington for International Monetary Fund meetings as he seeks funding to refinance upcoming debt maturities at lower rates.

The loan would be repayable over six years, including a three-year grace period, and would be almost fully backed by two World Bank institution – the International Bank for Reconstruction and Development and the Multilateral Investment Guarantee Agency – in a structure similar to the one Panama used to borrow US$1.4 billion earlier this year, the people said, asking not to be identified because the talks are private.

Spokespeople for the World Bank and Argentina’s Economy Ministry didn’t immediately respond to requests for comment.

Argentina is negotiating an interest rate of about five percent, though talks aren’t final and terms could change, the people said. The financing would be significantly cheaper than returning to global capital markets now, where Argentina faces bond yields above nine percent.

The next step after securing the loan would be a return to international markets, the people said. Caputo told investors Wednesday that Argentina wouldn’t need to tap global capital markets at least for the rest of this year. 

The financing would come on top of Argentina’s existing US$20-billion IMF programme and a separate currency swap line with the US Treasury for the same size.