Deadline arrives for Argentinian debt restructuring proposal

Buenos Aires has until the end of today to reach an agreement with creditors on restructuring $65 billion of foreign

ArgentinaAFPviaGettyImages

Photo: Getty Images

Buenos Aires has until the end of today to reach an agreement with creditors on restructuring $65 billion of foreign debt. With the repayment grace period ending, Argentina will ask for a deadline extension.

Faced with a sovereign debt default—the country’s ninth in history—Economy Minister Martin Guzman is trying to extend restructuring talks to avoid economic collapse. Argentina is expected to experience a third year of recession, and with $323 billion in total sovereign debt, the country needs foreign creditors to agree to delay the $65 billion payment for an economic reprieve.

As 25% of its debt is denominated in foreign currency, Buenos Aires can either spend existing foreign reserves to support public health and keep the Argentinian economy afloat, or it can pay its creditors. The current payment obligations preclude them from doing both. Only 12% of foreign creditors, which collectively own 41% of Argentina’s debt, agree with the restructuring proposal. Creditors have submitted counter proposals for delayed repayment, but Buenos Aires argues that they don’t go far enough to solve the crisis. If Buenos Aires defaults, international trust in Argentina will be shuttered, foreign capital will exit, the peso will devalue and the shock will throw the country into a severe economic crisis.

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