Nobelist Stiglitz, economists from 20 countries back Argentina in debt showdown

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BUENOS AIRES — A group of 138 economists from 20 countries, including Nobel laureates Joseph Stiglitz and Edmund S. Phelps, urged Argentina’s bondholders on Wednesday to take a “constructive approach” to the government’s debt restructuring proposal.

“The onus is on private creditors to act,” said the open letter signed by Nobel Prize winners Stiglitz and Phelps along with other well-known experts including Jeffrey Sachs, Carmen Reinhart and Thomas Piketty.

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Key creditors have balked at Argentina’s proposal to impose large reductions on coupons, a three-year payment hiatus and push back maturities into the next decade. Bondholders have until Friday to respond.

It is part of a broader sovereign debt restructuring with creditors, including the International Monetary Fund and Paris Club of country-to-country lenders, as Argentina struggles to keep up with payments. The country was already in recession before going on lockdown against the coronavirus on March 20.

Argentine Economy Minister Martin Guzman worked with Stiglitz at Columbia University in New York before returning to his native country to manage the restructuring and implement policies aimed at bolstering Latin America’s No. 3 economy.

“Argentina has presented a responsible offer to creditors that reflects the country’s capacity to pay and is in line with the IMF’s technical analysis,” the economists’ letter said.

“A constructive approach to Argentina will show that the international financial community can a sovereign debt crisis in an orderly, efficient and sustainable resolve manner,” it added.

If the government fails to gain enough support for its deal, it could risk a painful default, with a grace period to pay around $500 million of interest on three separate dollar bonds set to expire on May 22.

The prospect of securing an agreement by Friday darkened after a trio of major creditor groups rejected the offer, and Guzman acknowledged that reaching a consensus had “proven difficult.”

The letter says both Argentina and it bondholders would benefit from negotiating a sustainable debt revamp deal as the coronavirus pandemic drives down global economic activity and the ability of government’s to pay their debts.

“The Covid-19 pandemic is driving an unprecedented global crisis. The tragic loss of life and economic activity has pushed humanity toward the worst global recession in modern times. Pressure on public finances has become enormous, particularly in developing countries that were already highly indebted,” the letter says. (Reporting by Hugh Bronstein; Editing by David Gregorio)