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  • Argentina’s government submitted a proposal to restructure $65 billion of its foreign debt last month. The offer, which expires on Friday, has already been rejected by a group of major asset managers.
  • Separately, a grace period for a $500 million group of interest payments on three foreign bonds is set to end on May 22.
  • If no deal is reached and payment is not made, this could see Argentina fall into default for the third time in just two decades.

Argentine President Alberto Fernandez (L) delivers a speech, next to Vicepresident Cristina Fernandez de Kirchner, during the inauguration of the 138th period of ordinary sessions at the Congress in Buenos Aires, Argentina on March 1, 2020.

Argentina is highly likely to slip into default this month, analysts have told CNBC, as the crisis-prone South American country enters a critical period of make-or-break talks with international creditors.

Argentina’s government submitted a proposal to restructure $65 billion of its foreign debt last month. The offer, which expires on Friday, has already been rejected by a group of major asset managers.

 

Separately, a grace period for a $500 million group of interest payments on three foreign bonds is set to end on May 22. If no deal is reached and payment is not made, this could see Argentina fall into default for the third time in just two decades.

It comes nearly five months into President Alberto Fernandez’s administration. The grains producer, which was already grappling with a two-year recession, sky-high inflation rates and a mounting debt crisis, has been under national lockdown since March 20.

How did we get here?

Earlier this week, Economy Minister Martin Guzman told the Financial Times that the country was willing to consider defaulting on $65 billion of foreign debt unless investors agreed to recent negotiations. He cited the coronavirus pandemic as a reason why Argentina would be unable to pay an insurmountable level of debt.

“As anticipated, we expect Argentina to prefer a default that can be domestically blamed on the Covid-19-enhanced recession,” Jimena Blanco, head of Latin America at Verisk Maplecroft, told CNBC via telephone.

Speaking from Buenos Aires, Blanco said she believed a new default was now “a matter of time.” The political risk consultancy forecast an 89% probability that the country would register its ninth sovereign debt default before year-end.