A TECHNICAL DEFAULT TOOK PLACE IN ARGENTINA

On May 22, 2020, Argentina has experienced another technical default. The governmental dollar bonds required the payment of the interest to creditors in the amount of $ 503 million, but the country's authorities, led by Alberto Fernandez, decided not to pay until an agreement on the reconsideration of an international debt is reached.

We should recall that in February, the Argentinian parliament granted the special powers to reconsider the state of the financial system of the republic in connection with public debt to the country's cabinet. Until the end of 2020, the government can independently bargain with the creditors to restructure an international debt of the country.

The total loan obligations of Argentina have already amounted to $ 323 billion, which is partially the state’s own debt that exceeded $ 120 billion.

According to approximate calculations of economists, this amount exceeds 90% of the GDP of the Latin American republic.

For those people who were following the financial situation in Argentina, the current technical default was not a surprise. Previously, Rusbankrot have already published an article about the country's possible bankruptcy and the proposal of the Minister of Economics Martin Guzman to take a step towards default. Formally, the failure to make a payment on the bonds took place on April 22, but there was a one-month grace period, during which many expected that an agreement with leading creditors would still be reached.

The depositors of the Argentinean banks began to cash out American dollars en masse in May. The national currency (peso) began to bargain twice as much as the official in the "black" market.

The experts note that the Argentine authorities, taught by the negative experience of the previous defaults that had caused rebellious behavior in the society and the organization of the riots, this time turned out to be more prepared for negotiations with creditors. The government wants to restructure the private owners’ debt of $ 68.8 billion, which is a stumbling block in the negotiations.

The negotiations will continue until June 2 - the authorities do not intend to pay before the result is satisfactory for Argentina. They suggest reducing an interest on the foreign loan bonds to 2.3% (currently 7%), declaring a three-year moratorium on the payments. The opposing party agrees only for one year and does not intend to refuse to receive $ 37.9 billion of interest.

In a different situation, the foreign creditors could have taken the path of arresting Argentina's property abroad.

But the experts say that in the current situation, such a step will not produce results - the country actually has no serious assets abroad. The third year of the endless recession and 1/3 of the population living, below the poverty line, do not leave the state any chance for serious maneuvering, forcing to stand its ground.