Mohamed El-Erian: Argentina's debt proposal deserves support
After months of often difficult negotiations, Argentina made a new offer to creditors Sunday that stands a solid chance of anchoring one of the largest sovereign debt restructurings in the history of emerging markets.
Inheriting a troublesome situation in December, the newly elected government of President Alberto Fernández embarked on negotiations with creditors.
Argentina is seeking to restructure $66 billion of $250 billion in foreign currency-denominated public debt.
By potentially lifting a big cloud hanging over the countrys ability to grow solidly and inclusively directly for the governments finances and indirectly by improving prospects for private sector activity such an orderly and collaborative resolution could help overcome long-standing economic challenges that have recently been worsened by Covid-19.
Indeed, creditors need only compare the potential net present value of the Argentine offer (around 53.5 cents on the dollar at a 10% exit yield) to the outcome of the messy 2005 restructuring.
According to calculations by Gramercy Fund Management LLC, Argentina would secure around $40 billion of cash flow relief over the first 10 years, equivalent to some 9% of gross domestic product.
At: https://www.bloomberg.com/opinion/articles/2020-07-06/argentina-debt-offer-could-mean-breakthrough-with-creditors-imf
Mohamed El-Erian, chief economic adviser at Allianz and former chair of President Obama's Global Development Council (201217).
El-Erian notes in regards to Argentina's effort to restructure $66 billion of its foreign debt that "it would be in neither side's long-term interest to allow the theoretical best to be the enemy of the attainable good what is now on the table warrants support by both Argentina and its creditors."