PARIS (Reuters) - Argentina
reached an agreement on Thursday with creditor nations
on repaying overdue debts, in a landmark deal that
should open up much-needed international financing for
The Paris Club of creditors said the agreement will allow Argentina
to clear over five years arrears that stood at $9.7 billion at the
end of April.
Negotiations over the deal - whose terms one analyst said looked
favourable for Buenos Aires - had dragged into the early hours.
The dispute was the legacy of Argentina's 2001/2002 default on
roughly $100 billion, which left it starved of foreign capital.
The country's resistance to settling with its creditors until now
had made it a pariah of international capital markets but a hero in
the eyes of many Latin American leftists.
"Paris Club creditors welcomed progress made by the Argentine
Republic towards the normalisation of its relations with creditors,
the international financial community and institutions," the group
said in a statement.
"Realisation of initial payment under a formal commitment of
Argentina to fully clear its arrears is a necessary and important
step for (this)...normalisation."
Argentina's refusal hitherto to bow to its creditors has also
created a mountain of litigation and helped fuel inflation that has
eroded living standards.
The main challenge now to it regaining full access to markets is a
long-running battle with "holdout" sovereign bondholders who have
declined to participate in its debt restructurings. The U.S. Supreme
Court is expected to decide in coming weeks whether to take on the
case. If it does not, Argentine officials have said the country may
be forced into a technical default.
Offering the country some breathing room, the Paris Club agreement
calls for a first instalment of at least $1.15 billion due by May
2015, followed by another payment within a year.
The group said the deal cleared the way for export credit agencies
of its members to resume doing business with Argentina, which should
ease making foreign investment in the country.
Foreign investment could prompt a revival in Latin America's No. 3
economy, which faces a decline in output this year, not least in
helping develop its vast Vaca Muerta shale field.
PARIAH NO MORE?
With its dollar reserves dwindling, Buenos Aires has been eager to
secure a deal that does not put too much strain on its balance of
payments. Argentine central bank reserves stood at $28.6 billion as
of Monday evening.
"It seems a good deal for Argentina, both in terms of the seemingly
generous repayment profile and the fact that they seem to have
reached an agreement much sooner than I expected," said Stuart
Culverhouse, head of research at Exotix, a frontier markets broker
"The hit to reserves appears light in the near term, which will
reassure exchange bondholders."
Argentina and Paris Club members came close to striking a deal in
2008 but the government pulled out at the last moment, concerned
about its falling foreign exchange reserves in the midst of the
global financial crisis. Germany is Argentina's biggest Paris Club
creditor with about 30 percent of the debt, followed by Japan with
about 25 percent. Smaller holders include the Netherlands, Spain,
Italy, the United States and Switzerland.
Argentina wrung a major concession from the Paris Club by avoiding
any International Monetary Fund involvement in the deal, which the
creditor group usually requires.
President Cristina Fernandez' government has publicly lambasted the
institution and would have lost credibility if it had to accept an
IMF programme or audit.
Though a major agricultural producer and endowed with shale oil and
gas reserves, Argentina's development has fallen behind many other
emerging economies, stunted by a history of economic mismanagement.
The country's history with the informal group of mostly Western
nations goes back to the Paris Club's origins in 1956, when
Argentina agreed to meet its public creditors in Paris.
(Reporting by Leigh Thomas, Additional reporting by Sarah Marsh in
Buenoes Aires and Sujata Rao-Coverley; Editing by John Stonestreet)