Argentina is unable to pay IMF, says Economy minister
Argentina wants three years without paying what it owes to the International Monetary Fund (IMF). Unlike what the original agreement with the fund says, Argentina's Economy Minister Martín Guzmán told Valor that the country cannot afford to pay the principal to the fund, even if it reaches an agreement with private creditors to restructure its foreign debt.
"We will have to negotiate a new program with the IMF. What we seek is not having to make any capital payments to the IMF for the next three years, simply because Argentina does not have the capacity to face payments with private creditors, nor with the IMF," Mr. Guzmán said, in an interview from his office through Zoom video-meeting service.
Although Argentina has already extended talks underway with private creditors, Mr. Guzmán said the offer to be announced later this week will be the last one. Sources say the government is willing to come up with a net present value of 49 cents on the dollar for each restructured bond. Investors want 55 cents on the dollar.
Mr. Guzmán, a disciple of Nobel laureate Joseph Stiglitz at Columbia University, where he was a researcher, speaks in tune with President Alberto Fernández: he said Argentina's crisis was inherited from Mauricio Macri's government, deepened with covid-19, and that the current administration wants to put the house in order. Among the post-pandemic priorities are to strengthen the capital market in pesos given the lack of confidence in the country's currency, reduce the budget deficit (estimated at 10% of GDP this year) and increase international reserves, currently at $42.7 billion, of which $10 billion are liquid. Only then will Argentina stop taxing exports and lift very strict capital controls.
Asked about the drop in trade with Brazil, which lost its position as Argentina's main trading partner to China, he nodded and called Brazil a sister nation. In practice, however, relations between both neighbors are at their worst since the military dictatorship.
The interview:
Valor: Friday sees a new deadline for an agreement with private creditors on proposed foreign debt restructuring. How are the negotiations going? Are creditors willing?
Martín Guzmán: We made a proposal this year and are working to improve it. The essential thing is that any agreement must respect the precepts of sustainability, it must accept that Argentina must be able to fulfill its commitments. We have been working to normalize the interest rates. Argentina is proposing a very modest reduction of capital and proposing to modify the interest rates, which today, in dollars, are around 7%. The idea is to lower them to a sustainable level for us.
Valor: To what level?
Mr. Guzmán: The first proposal was accepted by a number of creditors, but others rejected it. In the last few weeks, the understanding has been growing and other creditors accepted it. We continue working to maximize acceptance. The concrete figures are under negotiation, we are under a confidentiality agreement that ends on Friday.
But we look to reach a solution that respects the restrictions faced by Argentina. Restrictions that we have also defined with the IMF and that, at the same time, satisfy the preferences of our creditors.
Valor: Some economists say that, even with restructuring, it will be difficult for Argentina to reach a path of debt sustainability. Faced with this, in addition to the prospects of slow economic recovery amid the crisis, is there a new agreement with the fund on the horizon?
Mr. Guzmán: There are two issues here. First, any agreement must be sustainable. That premise is non-negotiable. About the amendment made to the existing offer, there will be no higher figure than...
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