Argentina’s 15-year debt battle is finally coming to an end.
Its government reached an agreement with major American hedge funds that it had battled with since the country broke the record books and defaulted in 2001.
Argentina agreed to pay a group of hedge funds led by NML Capital and its owner, billionaire Paul Singer, $4.6 billion. That represents 75% of the claims that the hedge funds had sued Argentina for, according to a statement issued Monday by the mediator in the case, Daniel Pollack.
The agreement would open the doors to allow foreign investment into Argentina again. It had been shut out of foreign capital markets since 2001. The hedge funds — known as “vultures” in Latin America — sued Argentina shortly after buying its defaulted debt and a battle ensued for 15 years.
“It’s a very important step,” said Mauro Roca, senior economist at Goldman Sachs. “The country needs foreign investment to finance growth and development.”
Without foreign investment, Argentina’s economy has stagnated and suffered mightily from inflation, which has risen over 25% annually in recent years.
Argentina’s Congress still needs to approve the deal. It first needs to repeal two laws created under the former president, Cristina Fernandez de Kirchner, that forbade paying these hedge funds. It’s expected that Congress will repeal the laws and approve the deal.
A New York judge overseeing the case, Thomas Griesa, is also expected to lift an injunction that prevented Argentina from paying other bondholders until it reached an agreement with these holdout firms. Griesa signaled last week in a statement that he was heavily leaning towards lifting the injunction at a hearing on Tuesday.
The country’s new president, Mauricio Macri, came into office in December determined to end the 15-year battle. His cabinet had been negotiating with the hedge funds since December.
After Argentina battled the hedge funds for 15 years, Macri’s team closed in a deal in under three months.
