Problems relating to Trade and Investment on Argentina
13. Finance |
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Issue |
Issue details |
Requests |
Reference |
| (1) Difficulty of Finance Procurement from the International Finance Market | - GOA's prolonged public debt from Paris club resolved in May 2014 has been brought back to square one into "default" position, due to GOA's loss in the litigation with its holdout creditors. With this turn of event, financial institutions are least interested in extending loan to Argentina, making it difficult for member firm to handle infrastructure projects needing financing. | - It is requested that GOA expedites its agreement with the holdout creditors. | |
| (Action) - While GOA completed repayment of its debt of US$9.63 billion with IMF on January 2006, and insists on its self-economic recovery without the IMF aid, negotiation has come to a standstill on the debt restructuring with The Paris Club. - On 2 September 2008, the President signed the Decree directing the Minister of Economy and Production to execute the complete repayment of the public debt with The Paris Club in the amount of US$6.7 billion. - On 22 June 2010, Minister of Economy announced that GOA received application for exchange of the residual private debt against the bond that was defaulted in 2001 in the amount of about USD12.067 billion, or 66% of the total amount in concern. Thus, about 92.4% of the defaulted bond in 2001 has participated in this exchange, including the bond exchanged in 2005. |
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| (2) Compulsory Deposit Scheme for Borrowing from Non-Residents | - Borrowing from Non-Resident is subjected to Compulsory Deposit System (CDS) so that the Borrower is compelled to deposit 30% of the borrowed amount with no interest with BCRA. => CDS does not apply to the borrowing from overseas for operating fund. Its repayment is possible only after 365 days from the borrowing date. However, it is unclear if such purchase of foreign currency is executable as operating fund. Due to the absence of merit in borrowing foreign currency with the Argentine currency, which is under strong pressure for devaluation, most enterprises in fact domestically borrow in peso. |
- It is requested that GOA repeals the compulsory deposit requirement on loan from non-resident. | |
| (3) Distorted Domestic Financial Market due to Unreliable Distorted Economic Indicator | - While according to economic indicator released by INDEC (Instituto Nacional de Estadistica y Censos, the Argentine Government Agency responsible for the Statistics and Census of Argentina) the inflation after January last year would be on the way to improvement, it remains below the actual inflation rate. Official interest rate, reflecting the INDEC released inflation rates, includes high inflation rates so that in the domestic financial market, no one is willing to take on mid-long term funding. The local fund procurement, consequently, gets restricted only to external foreign currency. While GOA offers programme for mid-long-funding, it is complex, small-scaled, and without ability to filling the needs for foreign currency. Its user friendliness is obscure. | - It is requested that GOA overhauls the domestic long-term financing market. | |
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