Argentina Heading For New Financial Horizons Under Mauricio Macri
- ftheprofit
- Apr 13, 2016
- 2 min read
When Argentina’s senate approved President Mauricio Macri’s national debt repayment deal aimed at holdout creditors earlier this week, the market greeted it more with a sence of expectation than relief, despite the fact that the incumbent head of state did not have a majority in the legislative chambers and faced a tough task.
The holdout creditors, who refused to agree to a restructuring of Argentina’s debt after it defaulted on nearly $100 billion in 2001, can now be paid after a legal tussle that has stretched back over a decade nears its conclusion. Central to the deal is a cash payment of $4.7 billion; around 75% of what Argentina owes to funds that sued the country in a New York court over non-payment of debt.
Most bondholders took part in debt exchanges in 2005 and 2010, but NML Capital – an affiliate of Elliott management – along with a group of 60,000 individual Italian investors led by billionaire investor Paul Singer held firm against Macri’s left-leaning predecessor Cristina Fernandez de Kirchner.
US President Barack Obama shakes hands with Argentina’s President Mauricio Macri at the government house in Buenos Aires, Argentina, Wednesday, March 23, 2016 (Photo: Martin Zabala/AP)
In turn, she refused to pay and described them as “vultures” among other fancy expletives colored by her brand of populism. End result was restricted Argentine access to global credit markets and even if the country was to access them, offers came at double the lending rates major Latin American economies were availing, somewhere in the region of 10.7%.
Prior to the Senate vote, Macri – elected last year on a promise to improve Argentina’s economic fortune – had warned lawmakers that a “no” vote might well condemn the country to remain a “financial pariah” shunned by global credit markets.
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