Al Ain newsletter Mohsen Khader
Sunday 05/25/24 04:57 AM Abu Dhabi time
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Argentina has defaulted on a payment of its accumulated debts for the ninth time in its history – since independence in 1816 – and the fifth in the last 20 years and the second since 2000, in what appears to be a “vicious circle” that Buenos Aires is unable to exit from.
According to the British Guardian newspaper, Argentina is currently on the verge of a “technical bankruptcy” in the event creditors reject its proposals for restructuring.
Argentina has many tales with default, the last of which happened in 2001 when it failed to repay 100 billion dollars in debt.
After this failure, the country entered into a violent economic and social crisis.
Currently, after nearly 20 years of that crisis, Argentina faces the same situation as its economy has been in recession for two years and inflation has registered a significant increase at 53% and poverty at 33%.
The debt of Argentina currently stands at 324 billion dollars, accounting for 90% of its gross domestic product, including 65 billion dollars for foreign investors.
Most of this debt has been formed since 2016 when international investors were optimistic about President Mauricio Macri’s capitalist government, which increased the bet on the recovery of growth after years of government intervention in the economy under the leadership of former President Christina Fernandez de Kirchner.
However, things went wrong in Macri’s era as the currency fell and inflation rose.
In 2019, left-leaning Alberto Fernandez (Kirchner’s ally) won the presidency of Argentina to adopt a different approach to debt by stopping interest payments and renegotiating.
And she says The Guardian Most of Argentina’s debt is in foreign currency. At the end of last year, it reached $ 414 billion, or 93%.
Argentina received the largest loan in the history of the International Monetary Fund in 2018, worth $ 57.1 billion over three years.
The current crisis
The last amount that Argentina defaulted is a $ 500 million payment that is interest on bonds.
Argentina says it will not pay any interest, and has proposed to creditors a restructuring plan that includes much lower interest payments on its debt and deferral of payments until 2024.
The proposal includes exchanging bonds for new ones with a three-year amnesty period without payments, a reduction of 5.4% in capital and 62% on interest.
Creditors reject these proposals, prompting Argentina to extend the deadline for negotiations with them until June 2.
A group of top economists, including Thomas Piketty and Nobel Prize winner Joseph Stiglitz, urged bondholders to take a constructive approach to restructuring Argentina’s debt.
They said debt relief for the country would be “the only way to fight the epidemic and put the economy on a sustainable path.”
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