How Argentina’s Paris Club Payments Have Been Deferred

On June 26, 2021, Presidential Decree No. 412/21 was published in the Official Gazette. The Decree was handed down a few days after the Ministry of Economy announced a so-called “time bridge” with the Paris Club until March 2022.

The announcement and the Decree occurred against the backdrop of Argentina's negotiations with its two main non-private creditors: the International Monetary Fund (IMF) and the Paris Club. According to the Ministry of Economy, an understanding with the Paris Club can prevent a default on July 31 of this year and implies USD 2 billion in financial relief for Argentina.

Under the Decree, payments of the debts incurred under the Bilateral Agreements executed with the participating creditor countries of the Paris Club will be deferred until the Ministry of Economy determines otherwise as negotiations progress or if a new framework agreement is executed, or until May 31, 2022, whichever occurs first.

The deferral does not apply to the payments contemplated under article 2 of the Decree, which are partial payments of debt services to creditor countries, the amounts and dates of which are outlined in the Annex of the Decree. These partial payments are scheduled for July 28, 2021 and February 28, 2022.

The Decree instructs the Ministry of Economy to renegotiate a new Framework Agreement with Paris Club countries to replace the “Joint Declaration on Arrears Clearance with the Republic of Argentina” dated May 29, 2014, as well as the Bilateral Agreements executed. As stated in the recitals of the Decree, the renegotiation must respect the payment possibilities of the Argentine Government. The Decree appoints the Ministry of Economy as the enforcement authority.

Meanwhile, the country is also renegotiating its debt with the IMF under the Stand-By Arrangement of 2018, in order to transition to an Extended Fund Facility (EFF) that implies longer terms of payment.

Negotiations with the Paris Club and the IMF are being carried out within the context of the recent sovereign debt restructuring implemented by Argentina in 2020 with its private creditors, both in the tranche of bonds governed by foreign law and in the tranche of bonds governed by local law. In both exchange transactions, Argentina obtained a high level of acceptance.