Argentina’s debt restructuring talks, in a tense final stretch, hit a roadblock on Wednesday with the government determined not to cede further ground after making an improved offer and a key creditor group warning that negotiations had failed.
An Economy Ministry source told us the country was sticking by its latest proposal with a net present value of around 50 cents on the dollar and warrants linked to Argentina’s farm-driven exports. The offer was shared with creditors during recent talks.
The South American grains producer is in talks to revamp around $65 billion in foreign debt that has become unsustainable. The two sides have been inching closer, though tensions have simmered below the surface.
“The government believes that the creditors’ proposal has an unsustainable cost for Argentines,” said the Economy Ministry source, who asked not to be identified as the talks were private. Creditor groups have made counter-proposals during the process.
“The president is not going to cede any further,” the source said.
The major “Ad Hoc” bondholder group, including names like Fidelity, AllianceBernstein and BlackRock, said in a statement that the Argentine government had “walked away” from a counterproposal it had made and called the talks a “failure.”
Argentina’s Economy Ministry released details of the latest version of its own proposal in a statement late on Wednesday, which it said had been shared with creditors. It also published two counterproposals it had received.
The ministry said creditor demands had varied widely and that some were “inconsistent” with what the country could meet.
Argentina’s center-left Peronist President Alberto Fernandez said in a televised interview with network Telefé that the country would keep negotiating with creditors to try to reach an accord, but would not pay more than it was able.
“We are going to pay what we can. Not a millimeter more. And in that I am inflexible,” he said.
A second person with knowledge of the debt negotiations and familiar with the government’s thinking said the country had gone “as far as we could, but the creditors want more.”
Proposed warrants tied to agricultural exports had appeared to fall short with bondholders, the person said. “The creditors saw the warrants as a perk but not as a bargaining tool strong enough to bridge the gap,” he said.
Argentina, which already improved an original offer made in April, has long argued that debt sustainability analysis shows it cannot afford to pay much more. The International Monetary Fund, a major creditor, has supported that view.
“(Creditors) are not recognizing the restrictions that we set out in the debt sustainability studies that the government and the IMF did,” the second person added. “Allowing the NDAs (nondisclosure agreements) to expire means we reached the limit of what we can give and the creditors have not acknowledged that the limit had been reached.”
Another creditor involved in the talks with Argentina said the saber rattling was not wholly unexpected.
“There’s this point in every negotiation. If you are trying to get the other side to blink, you have to at least pretend you are willing to walk away from the table,” the person said.