Argentine Senate debates deal that would end debt standoff

BUENOS AIRES, Argentina (AP) — Argentine senators debated late into Wednesday night over a deal with creditors in the U.S. that would put an end to a years-long dispute that has kept the South American nation on the margins of international credit markets.

The deal, reached in late February, must be approved by Congress. The House of Deputies passed it earlier this month. The Senate began debating Wednesday morning and was expected to vote by early Thursday.

Passage would put an end to a bitter chapter that made Argentina a financial pariah and was often a point of sharp political clashes. It would also be a boost for President Mauricio Macri, who campaigned on promises to restart the continent’s second largest economy, in large part by solving a dispute so thorny it led to changes in how debt contracts are restructured worldwide.

While Macri’s PRO party doesn’t control either chamber in Congress, most analysts believed the measure would pass because the nation is strapped for cash and needs foreign investment to begin growing after four years of economic stagnation. Still, it was clear as the debate stretched past 12 hours that few were in a mood to celebrate.

“I will vote for this because we are complying with a sentence,” said Sen. Norma Durango from the Peronist Party. “But I’m not happy or at ease” about it.

Detractors argued that the deal was a bad one and wouldn’t lead to the investment sought by Macri.

“They want to sell us a crisis so we buy an expensive debt on bad terms,” said Sen. Anabel Fernandez, a member of a youth movement called La Campora, headed by Maximo Kirchner, the son of former left-leaning President Cristina Fernandez. “This is taking us straight to hell.”

Fernandez refused to negotiate with the creditors she called “vultures,” arguing they were trying to bully Argentina. The issue was a central part of last year’s presidential campaign. Macri and opponent Daniel Scioli, Fernandez’s chosen successor, clashed over whether a deal was necessary and who would be the tougher negotiator.

The seeds of the dispute go back to 2001-2002, when Argentina defaulted on $100 billion in debt. Most holders of the original debt, along with those who bought up bonds in the aftermath, agreed to swaps in 2005 and 2010 for bonds worth far less. But a group of creditors led by billionaire hedge fund manager Paul Singer refused. They took Argentina to court in New York, where the debt was issued, and won.

U.S. District Court Judge Thomas Griesa in New York repeatedly ruled against Argentina, saying the country had to pay the holdouts before it could pay other creditors holding renegotiated debt. Those rulings kept Argentina from accessing international credit markets, forcing it to issue domestic bonds and search for backdoor financing from countries like China.

The long, costly fight led to changes in how debt is issued worldwide. Many countries have restructured contracts in attempts to avoid getting into similar situation.

Under the deal being debated by the Senate, Argentina would pay $4.653 billion to resolve all related claims. The agreement would pay the funds managed by Elliot, Aurelius Capital, Davidson Kempner and Bracebridge Capital about 75 percent of their full judgments, according to details released in late February.