Senate approves deal to end debt dispute, re-enter markets
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[March 31, 2016]
By Hugh Bronstein and Maximiliano Rizzi
BUENOS AIRES (Reuters) - Argentina's
Senate gave the green light to a landmark deal to repay creditors
holding defaulted debt in the early hours of Thursday, marking the end
of a 14-year legal battle that had made the country a global financial
The deal, which had already been approved by the lower house of
Congress, is the cornerstone of new President Mauricio Macri's plan
for revitalizing an economy hobbled by low investment, high
inflation and precarious central bank reserves.
Senators across the political divide voted by a 54 to 16 margin in
favor of the deal after a 14-hour-long debate that dragged on beyond
Cash-strapped provincial governors who see it as key to regaining
access to financing had lobbied hard in favour of the package. Now,
Macri must simply sign the deal into law.
"What we are doing is resolving the topic of debt, we are not
increasing debt, we are closing a judicial question," said Miguel
Pichetto, head of the opposition Victory Front party in the Senate,
who voted in favour of the deal despite coming under attack from
some members of his own party.
The country has until April 14 to pay $4.65 billion to the main
hedge funds that fought for and won an advantageous settlement after
balking at steep payment reductions offered in Argentina's 2005 and
2010 bond revamps.
A U.S. court ordered Argentina to negotiate a settlement, which
should set the stage for the country to once again issue global
Locked out of the capital markets since its 2002 default, Argentina
needs international financing to close its wide fiscal deficits,
improve infrastructure and start rebuilding investor confidence.
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The deal allows Argentina to issue up to $12.5 billion in new bonds.
Smaller funds have also joined the suit over the years and the final
tally for settling the dispute is unknown.
Appeals being heard in U.S. federal courts could push back the April
14 deadline for payment to the funds, but are not expected to derail
Money left over from the bond issuance would give financial
breathing room to Macri as he carries out free-market reforms and
starts paying down deficits run up by previous Argentine leader
Cristina Fernandez, who left office in December after eight years of
free-spending populist rule.
(Additional reporting by Gabriel Burin and Sarah Marsh; Editing by
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