The Executive Branch stopped paying that consortium of nations in 2019 and from that moment on, outstanding liabilities began to accumulate at an increasing interest rate. As the definition with the IMF has been postponed for this year, the outcome of that negotiating table will be as a witness to agree on new conditions with the Paris Club. The key highlighted by private officials and analysts is that the chairs on the Fund's board are occupied by the same creditor countries of the Parisian club, so in some ways the two agreements are being discussed almost simultaneously.

The chairs in the Fund's board are occupied by the same creditor countries of the Parisian club

Economy Minister Martín Guzmán advanced that he will seek to have the liabilities outstanding with the Paris Club treated similarly to the one given by the Palace of Finance to the rest of the debt in foreign currency under restructuring: to reduce interest rates and to achieve grace periods before rescaling payments. The agreement with the private included removes, something that is not traditionally on the negotiating menu with international organizations.

In the event that casa Rosada could agree with the Monetary Fund and the Paris Club to reschedule the repayment of the appropriations, Economía would thus be freed from the two most onerous payments that await it in 2021, which would add between the two agencies just over USD 6 billion. By comparison, debt-to-private redemption freed the Treasury from virtually every payment to bonistas this year and would only have to spin about $150 million over the year, much less than the reserves the Central Bank could recompose so far this year.

To whom and how much the country owes

The very birth of the Paris Club, which today depends on the French Treasury Directorate, is related to debt renegotiation with Argentina. In 1956, a group of creditors from the country, including nationals, state-owned companies or export lending agencies, established a common table to discuss with the Argentine state how it would repay its obligations. The country's debt to that consortium went through different negotiating instances over the following decades.

The Paris Club consists of Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, South Korea, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, the United Kingdom and the United States, representing approximately 60% of the world's GDP. But there is also another group of nations operating in particular negotiations, which are the United Arab Emirates, Argentina, China, Czech Republic, India, Kuwait, Mexico, Morocco, New Zealand, Portugal, South Africa, Trinidad and Tobago and Turkey.

The very birth of the Paris Club, which today depends on the French Treasury Directorate, is related to the renegotiation of debt to Argentina

Economists Marcos Ochoa and Maximiliano Albornoz explain in a study by theCentre for Studies for Structural Change (ECSC), the Paris Club is organized on the basis of six principles: solidarity, i.e. member countries act as a group when negotiating with a debtor; consensus, as decisions cannot be taken without the agreement of all members; distribution of information: Member countries share the same information and data, the processing of which is confidential; case-by-case analysis: decisions are made by analyzing the individual situation of each debtor; conditionality: Agreements often provide for a reform agenda with the IMF and comparability of the agreement, implying that a country that signs an agreement with the Club cannot make any agreement that is less favourable than that agreement.

In early 2002, when then-President Adolfo Rodríguez Saá declared the default debt, Argentina still owed the Paris Club about $3.85 billion and the flow of payments was interrupted. During Nestor Kirchner's government, the renegotiation with the IMF was also hand in hand with an agreement with the Paris Club, but the resolutions of the two fronts ended up being far away in time from each other. In 2006, the State cancelled all its obligations to the Fund and had just set out to regularize payments with the consortium of creditor nations by the end of 2008.

The international crisis of 2008 and 2009 postponed the negotiation and was resumed in 2014, led by then-Economy Minister Axel Kicillof. During the round-trip months with the Paris Club, the Government estimated that between the default declared in 2001 and that time the balance to be returned had grown at a rate of 7.2% per year.

As a result, the agreement signed by Kicillof and Argentina's creditor countries involved the repayment of USD 9.69 billion within five years, until May 2019. In total, about $5 billion was the capital owed while the rest (about $4.7 billion) were made up of interest from those liabilities and on points accumulated over the years.

The loan repayment scheme had some particularities. First, payments are made in eight different currencies (from dollars to Swedish kronor). In addition, the five-year period could be extended until May 2021 with a penalty. And finally, it did not establish a certain sum that the country had to turn to the Paris Club annually, but provided for a "range" of possible payments. According to a former Finance Officer of the Government of Mauricio Macri, "it worked as the minimum payment of the card, you could pay the minimum but what was accumulated was updated with a higher interest".

The agreement with the Paris Club stipulated a payment window until 2021, albeit at an additional cost. The interest at which the balance was updated became 9% per annum

In 2014, the deal was signed, it made a first payment of $640 million. The following year it was $682 million. Already under the macrist mandate, the Treasury rotated $1.68 billion in 2016, $1.38 billion in 2017, $1.891 million in 2018 and $1.868 billion in 2019. That was the last payment made by the state. At the end of the initial five years of the agreement, Argentina still owed about USD 1.9 billion.

The fine print signed with the Paris Club stipulated a window of two more years to cancel those outstanding balances, albeit at a considerable additional cost. The interest at which this amount was updated became 9% per annum, double the rate it had until 2019.

Shortly after tying up debt restructuring, Minister Martín Guzmán announced to the consortium of nations that he would seek to postpone the payment for a year. On 13 March, the Minister of Economy sent a letter to members of the Paris Club expressing thedecision to postpone until May 5, 2021 the payment of USD 2.1 billion (i.e. $1.9 billion plus interest rate) originally expired on May 5, 2020.

Days later Guzman advanced them that he would seek a change in the terms of the agreement. On 7 April, the Palace of Finance sent a second letter to the Paris Club with a proposal to amend the terms, and anticipated that it intended to discuss mainly an extension of maturity dates and a "significant reduction" in the interest rate.

The Government hopes to be able to complete a double in debt restructuring before May and thread agreements with the Monetary Fund and the Paris Club. This was let known by the Argentine representative to the IMF, Sergio Chodos. "It would be important to be able to close an agreement with the IMF before negotiating with the Paris Club in May. But that doesn't mean we have to hurry. I think the most important thing is to do this process right, identify the priorities and things that we understand will serve Argentina and from there close the agreement," he said a few weeks ago.

Germany (37%) Japan (22%) concentrate most of the Paris Club's creditor balance towards Argentina

Consulted by Infobae for this note, Paris Club General Schwan Badirou Gafari and the Argentine office of the French Treasury Directorate General did not comment on the negotiation with Argentina.

Some players are on both courts, both in Washington and Paris. Because the creditors of the consortium of nations also have their armchairs on the IMF board. In detail, more than half of Argentina's debt to the Paris Club is concentrated in two countries: Germany (37%) Japan (22%). Further back is the Netherlands (almost 8%), Spain (6.68%), Italy (6.29%) United States (6.28 per cent).

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