March 25, 2023

Brighton Journal

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Paris Club: Talks begin and government seeks to reduce payment of outstanding USD 2,000 million

Minister Sergio Massa is expected to visit the French capital once a final consensus is reached, which could happen in mid-November.

The government resumed technical talks in the French capital with Paris Club to reconstruct $2 billion Due to the Association of Creditor Countries. One of the key issues to be discussed between the parties is elevation Interest rate That amount has been revised in recent years, and the economic team is seeking to reduce it significantly.

Head of advisers to the Ministry of Economy, under strict secrecy Leonardo Madgur and Director of INDEC and Advisor on International Financial Relations Marco Lavagna In the last few hours, they started making technical contact with the men Emmanuel Moulin, General Secretary of the Paris Club and Secretary of the French Treasury. Minister Serge Massa It is preparing to land in the French capital once consensus is reached to give the final touches to the deal, which could happen in mid-November.

The keys to the technical talks, which began in Paris and continue tomorrow, Friday, are to do as promised, with enthusiasm in the agreement signed by the then economy minister in 2014. Axel Kisilo. The formula that operated at the time favored an update in between 3 Y 4.5% Annual during the first years of validity of the payment agreement.

The fine print signed at the Paris Club gave two more years to clear the outstanding balances, albeit at considerable additional cost. That amount becomes the renewed interest 9% Year-to-date, twice the rate till 2019.

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Thus, the $1.9 billion Five years after commencement of the contract it remained unpaid $2.4 billion For that passion that started running. Part of the balance was withdrawn in two installments through a “bridge” technical agreement reached by the then minister. Martin Guzman Until the basic solution is found, that is, what is being negotiated at the moment. Some $227 million Paid in July 2021 and others $188.5 million Last February.

Emmanuel Moulin, Secretary of the Treasury of France and General Secretary of the Paris Club
Emmanuel Moulin, Secretary of the Treasury of France and General Secretary of the Paris Club

Another issue with technical trading is the return period of remaining stock and when the cycles begin. The International Monetary Fund pays the Paris Club on Argentina’s debt sustainability assessment. It should start again in 2026That is, a scheme like Extended Financial Facility (EFF) with a grace period of more than three years.

There is a geopolitical issue with these types of negotiations. In addition to the technical agreement, the country will need the consent of the fifteen creditor countries that make up the consortium to execute the signature. By tradition, the Paris Club takes its decisions unanimously. To achieve this understanding, Casa Rosada will need the help of a monetary fund: the members of its board of directors, at the same time, Argentina’s partner countries in the club.

Even her own Kristalina Georgiev And IMF staff pressed to expedite a definition in their last technical report. “Continued goodwill efforts from all parties are required to ensure the successful restructuring of the Paris Club debt. Ensuring that international partners meet funding commitments is also critical to supporting the program’s key objectives,” said the Executive Director.

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In a letter from Sergio Sotos Inside workers In a statement released on Friday, the official assured: “Our officials have resumed negotiations with the Paris club and our goal is to reach an agreement in the coming months based on a payment schedule consistent with our ability to pay and the sustainability of our debt.

Massa is seeking to end talks with the Paris Club and restructure the debt as the third step in the government’s process of renegotiating its foreign currency liabilities. Alberto Fernandez In the first instance between private bondholders and later the International Monetary Fund.

The Argentine Economic Group interacted with Paris Club officials during the recent IMF Annual Meeting in Washington
The Argentine Economic Group interacted with Paris Club officials during the recent IMF Annual Meeting in Washington

More than half of Argentina’s debt to the Paris club is concentrated in two countries: Germany (37%) and Japan (22%). Next are the Netherlands (almost 8%), Spain (6.68%), Italy (6.29%) and the United States (6.28%).

In 2014, Govt Christina Kirchner Signed the withdrawal agreement $9.69 billion Within five years, up to May 2019. In total, approx $5 billion The rest (about US$ 4,700 million) is capital built up by interest on these loans and penalties accumulated over the years.

Currently, the Paris Club is made up of Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, South Korea, Netherlands, Norway, Russia, Spain, Sweden, and Switzerland. ., the United Kingdom and the United States, which accounts for approximately 60% of world GDP.

Before resigning from the Palacio de Hacienda, Martin Guzman He said he had advanced a technical understanding with the French capital-based firm to secure new terms and a new interest rate.

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