Argentina sets plans to repay $10 billion Paris Club debt

Argentina may have established a path back into the global community with a plan to settle its debts.

News has emerged that the Latin American country has reached an agreement with the Paris Club, an organisation which represents the creditor governments of industrialised countries.

The terms of the deal make clear that the nation will pay off some $10 billion in arrears over a period of five years, with the first repayment due in May 2015.

Argentina has finally reached a debt agreement that could prove a stepping stone to better financial relationships with developed economies.

This means that if the schedule is met, the final payment will be made some 18 years after Argentina first defaulted on its debts in the wake of its biggest ever financial crisis. The fiasco left the country with $102 billion in debt, and it has not been able to borrow money on international markets ever since. Germany remains the biggest creditor, owed around 30 per cent of the outstanding debt, while Japan accounts for another quarter of the total.

However, the Paris Club says that Argentina managed to present a strong case for its improving economic and financial circumstances, including details of the measures it has taken to strengthen its resistance to external factors and plans to keep stimulating growth.

What’s more, the club has suggested that the important step of acknowledging its debts with 19 of the world’s biggest economies could make it easier for the nation to borrow from other countries once again.

“Realisation of initial payment under a formal commitment of Argentina to fully clear its arrears is a necessary and important step for the normalisation of financial relationships between Paris Club creditors and Argentina,” it says in its statement. “Paris Club members’ export credit agencies that wish to do so will resume their export credit activities.”

Argentina’s government has been quick to point out that the International Monetary Fund (IMF) was not involved in the talks, nor will it play any role in monitoring the nation’s compliance with the terms of the deal. That’s an important point of the government’s insistence that it has managed to solve its own problems, indicating that the country is getting back on its feet.

There may still be some level of uncertainty regarding Argentina’s future. Challenges from “holdouts” still pressing for the full balance of their bond holdings could cause problems down the line, depending on the outcome of the US Supreme Court’s decision to take the case on or not. But it seems there is at least a foothold for Argentina to finally rejoin the global financial community.