Argentine Finance Minister Alfonso Prat-Gay said the South American country would hold tough debt negotiations with U.S. investment firms suing over unpaid debt, as preliminary talks got underway in New York on Wednesday (January 13).
He did say it was imperative to resolve the country’s legal dispute because financing of the country’s fiscal deficit this year may depend on progress on the issue.
Solving the more than decade-long debt battle would enable Argentina to return to global credit markets and stop financing the deficit with the printing presses, a tactic which helped fuel double digit inflation under the previous government.
Prat-Gay said the claims from holdout creditors now totalled $9.9 billion and that the previous leftist government’s failure to settle with the creditors had cost the economy dear.
“In the last ruling and applying that ruling to all the ‘me too’ holdout creditors, which is more or less what is happening now in the court in New York, the cost went from $2.9 billion to $9.88 billion. Call it whatever you want to call it, for me it’s the cost of not doing anything for more than 10 years. Fantastic for domestic politics but it hurt us over the years and where we owed $ 3 billion (rounding up first figure) now we owe 9.88 billion. I’m talking about 6 billion dollars due to indolence and I’m only referring to the cases which are in the court in New York,” Prat-Gay told a news conference in Buenos Aires.
Former president Cristina Fernandez defiantly compared the holdout creditors to greedy vultures that rejected the country’s debt restructurings in 2005 and 2010 in which bond holders received less than 30 cents on the dollar.
Argentina defaulted for the second time in 12 years on July 31 after losing a lengthy legal battle with hedge funds demanding full payment on debt they own that stems from the country’s record $100 billion default in 2002.
Prat-Gay said the past government’s stance had created ‘garbage’ that new President Mauricio Macri’s administration would have to start cleaning up.
“The garbage isn’t ours but we don’t have any problem starting to clean it up, and the matter of the court case in New York is part of the garbage that we received (from the past Argentine government).” he said.
The new government aims to reduce this deficit to 4.8 percent of GDP this year and 3.3 percent in 2017, in part by eliminating subsidies for public services for the 30-40 percent of wealthiest Argentines, Prat-Gay said. Subsidies would be maintained for those who needed them, he added.
The minister said Argentina’s primary fiscal deficit, which excludes debt payments, was 5.8 percent in 2015 and would fall by a single percentage point in 2016. He said the government wanted to eliminate subsidies for public services for the 30-40 percent of wealthiest Argentines.
Inflation will ease to between 20 and 25 percent this year from 28 percent in 2015, the minister forecast, and would slow to 5 percent in 2019.
Last year, the centre-right Macri took power after 12 years of leadership by the left-leaning Kirchners, Nestor and Cristina Fernandez. (Reuters)
