Argentina is on the verge of a sovereign default

The Minister of Economy of Argentina, Martin Guzman proposed to prepare for another sovereign default. In his opinion, this will depend on the will of the private creditors and their desire to alleviate the terms of payment of public debt, which reached $ 65 billion.

Considering the fact that the majority of them look at the possible mitigation negatively, the experts predict a high probability of bankruptcy in Argentina.

If it takes place, it will be the ninth default in the history of the Latin American country and the first time the state goes bankrupt during a pandemic.

According to the government debt restructuring plan, proposed by the government in April, it is necessary to write off 62% ($ 37.9 billion) of the total interest accumulated on the debt, and also forgive 5.4% ($ 3.6 billion) of the principal amount of the debt. Since the deadline for payments expires in May 22, the last date for any changes to the existing agreements with the creditors is May 8. So far, the main private creditors(BlackRock, Fidelity and T Rowe investment funds) have not entered into a deal with the government. However, the authorities of Argentina are not in a hurry to agree with the terms and conditions, offered by the creditors as well.

The investors and banking institutions of Argentina express concern about the behavior of the government and the risks that an agreement will not be reached. Among the country's creditors there is an International Monetary Fund. The management of the fund in every possible way supports negotiations related to debts, trying to achieve a delay in payments to the Paris Club ($ 2.1 billion).

The experts note that the ordinary citizens of the country, including 169 Russians who can no longer return home due to the cancellation of the flights, will suffer from a possible default.

Argentina still continues to fight the recession and development of inflationary processes, caused by the previous defaults of 2001 and 2014. The coronavirus pandemic only exacerbates the possible negative consequences of such a bankruptcy.

What is more, the possible bankruptcy puts at risk Buenos Aires, the country's largest region, which also intends to restructure $ 7 billion of debt and so far cannot reach the agreement with the bondholders.

The experts note that the sovereign default can provoke protest moods within the country. In the conditions of the government crisis associated with the possible bankruptcy, the discontent of the population may spill onto the streets, despite the fact that the coronavirus is currently spreading in Argentina, and the authorities have introduced the measures of social isolation and restrictions.