Argentina: end of years of debt dispute

Argentina is about to return to the international capital markets. Parliament approved a settlement in the debt dispute with US hedge funds. This involves the repayment of liabilities that Argentina no longer wanted to service after the bankruptcy of 2001.

Around 14 years after the bankruptcy, the debt dispute between Argentina and US creditors has finally been resolved. After the Chamber of Deputies, the Senate in Buenos Aires also approved the agreement between the two sides.

Senators voted by a large majority to abolish two laws that blocked billions of dollars from being paid out to hedge funds.

Gigantic debt

The dispute goes back to the national bankruptcy at the end of 2001. Shortly before the turn of the year, the government announced that it would no longer service the country’s international debts. They amounted to more than $ 130 billion at the time.

This was followed by years of negotiations with the creditors. The government agreed with most of the donors to cancel the debt and convert the debt into government bonds.

The business of bankruptcy

In contrast, the US hedge funds NML Capital and Aurelius, as well as two other funds, insisted on the full repayment of the face value of bonds that they had bought cheaply after the bankruptcy.

The government under the previous president, Cristina Fernandez de Kirchner, refused to do this. Because the government bonds had been issued under US law, the funds sued a New York court and won. The judge also prohibited Argentina from servicing other creditors as long as the debt to the hedge funds was not paid. Argentina thus got into a so-called "technical insolvency" in 2014.

Funds waive claims

There was movement in the dispute after last year’s presidential election. Under the new President Mauricio Marci, both sides resumed negotiations and finally reached an agreement in March. Argentina is now paying the hedge fund $ 4.65 billion (€ 4.25 billion). Originally, they had requested the repayment of $ 12.5 billion.

Now the court in New York has to allow Argentina to return to the financial markets. However, this is likely to be a formality, as the agreement was negotiated by a mediator appointed by the court itself.

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