In the years following the default at the end of 2001, through two voluntary debt exchanges in 2005 and 2010, the government managed to agree on a payment method with 93% of the creditors. While the remaining 7% were defined by the lack of agreement and were in litigation with Argentina, which caused our country to be left out of the formal international capital market.

Consequently, the mechanisms to finance the fiscal deficit of the treasury, were reduced to: typical fiscal pressure, inflationary tax, or placement of internal debt.

Thus, one of the issues to be resolved by the new incoming government, was to end the situation of default technical. In practice, this translated into the search for a definitive solution to the conflict of that remaining 7%, the so-called vulture funds (or holdouts). Once the new economic team took office, these negotiations began quickly.

The debt with these funds at the end of 2015 was just over 11.500 billion dollars, which represented 45% of the BCRA's dollar reserves, valued at the value of the official nominal exchange rate of that date ($13,005/u$ s), and without including penalties.

On February 3, 2016, Minister Prat Gay reported a first pre-agreement with a group of Italian bondholders for 1.350 billion dollars. While on February 5, the economic team of the Ministry of Treasury and Public Finance presented a restructuring offer to all creditors who did not participate in the debt swaps of 2005 and 2010. Two types of proposals were made: base offer y offer passi passu.

From a legal point of view, it was necessary for Congress to repeal a couple of laws that prevented payment to these litigation funds (lock law y sovereign payment law).

The National Congress repealed both laws in the early hours of March 31, and the next day, the Government promulgated the law on payment to holdouts (Law 27.249), enabling the national executive the possibility of selling bonds in the market to cancel the debt in default.

Starting the month of April without internal legal impediments and with more pre-agreements reached, eyes shifted to waiting for the decisions of the North American justice system.

On April 13, the Court of Appeals for the Second Circuit of New York reported the decision to maintain the lifting of the precautionary measures ordered in the first instance by Judge Griesa, which had prevented Argentina from paying obligations.

After these precautionary measures were lifted, on Monday, April 18, the state went to the market to obtain the funds by offering different types of bonds. The next day the operation was closed with an issue of 16.500 billion dollars

This was a figure greater than the 12.500 billion dollars that the National Congress had authorized. So, in order to exceed the amount, the Executive allowed, through decree 594/2016, the Treasury to take on debt under foreign jurisdiction, for 10 billion dollars. It was agreed between the parties that payment would be on Friday, April 22; beginning, therefore, a new stage.

The Argentine case was emblematic for its magnitude, and went through different stages: arduous negotiations with investment banks, two debt swaps with haircuts, and a long path of litigation, all due to the international legal vacuum and the contracts.

On external scope New codes were created between creditors and debtors, issued by the International Capital Market Association (ICMA). In addition, Argentina obtained a diplomatic achievement at the UN, with the approval of nine principles that guide countries' debt restructuring.

Regarding re-entry into international financing markets, it can only be considered an advantage, in the sense that it is beneficial for a country to have a greater number of options, even if these are not used. The doubt lay in what costs should be assumed to achieve this goal. However, once the decision was executed, these costs sank, giving rise to a new stage still undefined.

In economics, we call sunk costs those costs that have already been incurred, and therefore cannot be recovered, which is why they should not affect future decisions. For example, if a person buys a movie ticket online, that past action should not affect the decision to go see the movie. Suppose that that same day and time another plan arose: to go to a recital. If this were the scenario, the cost of the ticket should not influence the decision, since it has already been spent, regardless of what is done.

Whats Next?

If the entry of new capital helps to improve the level of reserves, to stabilize the exchange rate, and has a positive impact on the real economy, without harming the maintenance of the debt; By definition, the benefit will be positive.

On the other hand, if the opening of the stocks accelerates the flight of foreign currency in the long term, new pressures are generated against the exchange rate, the financial flow does not translate into real investment flow, or a new debt spiral is entered; then the result will be the opposite.

In our full report, which we make available for download, we provide greater depth to the points presented, as well as a comparative analysis with other Latin American or developed countries on the rate they pay when issuing bonds. We invite you to read it.