Kaitlin Yent – During Argentina’s default crisis the nation racked up more than US$132 billion in debt. President Cristina Kirchner has been saying since 2008 that she wanted to at least begin paying it off, but has made little progress in six years. Since the global economic crisis, they have been unable to borrow from international markets and scarce foreign exchange reserves forced her to put off her promise.
Paris Club, a group of international creditor governments formed in 1956, has stated: “Realization of initial payment under a formal commitment of Argentina to fully clear its arrears is a necessary and important step for the normalization of financial relationships between Paris Club creditors and Argentina.
“During the meeting, the delegation of the Argentine Republic provided a description of the economic and financial situation of its country and presented the measures implemented by the Argentine Government aimed at enhancing inclusive growth and strengthening resilience to external shocks.”
Paris Club has agreed to cover US$9.7 billion on Argentina’s behalf. A high figure, to be sure, but mere pennies in comparison to the entire debt that Argentina has defaulted on. Paris Club says the first installment of more than US$1.15 billion is due by May 2015, the second installment by May 2016. The rest will follow over a five year term.
This agreement is a great coup for Argentina; one of the terms of the contact is that Argentina can resume doing business with foreign credit agencies, and vice versa.
While Paris Club acts as a united (yet informally organized) middle-man, it is the individual countries that are actually covering the debt. Germany turns out to be Argentina’s biggest savior, covering 30% of the entire credit. Japan is responsible for about 25% and Netherlands, Spain, Italy, Switzerland, and the United States are among the smaller contributions.