Argentina to use Paris Club grace period to further debt talks

Argentina will hold off on a US$2.4-billion debt payment with the Paris Club that’s due Monday and will instead use a 60-day grace period to try to reach an agreement with the group and avert another default.

The government aims to continue talks with the informal group of wealthy nations after the country had requested more time to work out an arrangement for the debt, according to a person with direct knowledge of the matter, who asked not to be named because the negotiations are private.

President Alberto Fernández’s administration is seeking to avoid a damaging default so it can refinance this debt after reworking a US$45-billion loan with the International Monetary Fund. Argentina has to pay US$2.2 billion in principal and US$237 million in interest payments to the club in May, according to official data from the Economy Ministry.

The Paris Club secretariat didn’t respond to a request for a comment outside of regular working hours, and a spokesman for the presidential palace also didn’t immediately respond. The Economy Ministry press office declined to comment.

With no access to international debt markets, Argentina is looking for a temporary Paris Club waiver after three years of recession. Bloomberg News reported May 14 that the group of nations is willing to spare Argentina from default if the country meets certain conditions.

While the biggest exporter of soy products is getting a boost from the rally in agricultural commodities prices, it still has to face other large loans that are set to mature later this year – including US$753 million in interest payments and US3.8 billion in principal owed from the country’s failed 2018 programme with the IMF.

In May 2014, the country reached an agreement with the Paris Club to repay a US$9.7-billion debt after 13 years in default. The loan was supposed to be repaid over a five-year period, but the country’s latest financial troubles delayed the final payments due this month. Creditors include Germany, Japan, United Kingdom, Italy, Spain and Canada.