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Argentina’s Buenos Aires Province Averts Default, as Major National Talks with IMF Loom

Feb. 4, 2020 (EIRNS)—The government of Buenos Aires province, Argentina’s wealthiest and most populous, averted a default on its BP21 bond today, when it agreed to pay the $250 million that came due on Jan. 26. Earlier, on Jan. 14, Governor Axel Kicillof had proposed that bondholders accept a deferred payment until May 1, as otherwise the province would have to default. It was stipulated that holders of 75% of the bond’s principal had to agree to his proposal for it to go through.

Upwards of 50% of bondholders did agree, but according to Bloomberg, Ambito Financiero and other Argentine media, Fidelity Investments, which holds 25% of the bond’s principal, played hardball and rejected the deferment proposal. Thus at noon today, Kicillof announced he would dip into the province’s coffers and make the payment, explaining that a default would have grave consequences for the province as well as for the national government, which is about to begin renegotiating its debt with the IMF and with private creditors.

Denouncing Fidelity’s “intransigence,” Kicillof announced he would immediately begin the process of restructuring all provincial foreign currency debt, as it is “unsustainable and unpayable.” Late this afternoon, Bloomberg chortled that the mighty Fidelity had called Kicillof’s bluff and “won big,” and that this was a good sign for “investors” in future negotiations. With its “outsized stake” in the BP21 bond, Fidelity was able to “block the proposal,” Bloomberg boasted, quoting a Eurasia Group analyst predicting that since neither President Alberto Fernández nor his Finance Minister Martin Guzman want a default, they might be willing to “sacrifice debt relief” to avoid it.

President Fernández has been touring France, Spain and Germany this week, seeking support from those governments for his negotiating stance with the IMF. He has stated repeatedly that Argentina needs a four-year respite during which it won’t pay either principal or interest on its debt, in order to revive the economy and eventually be able to pay. Ambito Financiero reported today that German Chancellor Angela Merkel told Fernández in their Feb. 3 meeting that she agrees with his approach and intends to support it at the IMF.

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