Brazil’s Mantega Downplays Argentina’s Default Status: Daily

By Lise Alves, Senior Contributing Report

SÃO PAULO, BRAZIL – The finance minister for Brazil, Guido Mantega, stated on Thursday that the impacts of Argentina’s latest financial woes on the Brazilian economy are likely to be almost null. Argentina is seen as defaulting on the billion-dollar debt after days of negotiations broke down on Wednesday night and no deal was reached.

“There is no direct impact since we are talking about a segment of the market which is very small. What may be affected are future restructuring of the debts which may be incurred in the future,” Mantega said.

The finance minister also avoided stating that Argentina had defaulted, stating that the neighboring country had made its first payment (US$642 million) to the Paris Club. “I would not call it a default, but rather a stalemate,” he explained.

The standoff between Argentina and creditors occurred after a U.S. court ruled in June that money set aside to pay those who had agreed to a restructuring plan could not be distributed unless a group of hedge funds, which did not agree to the plan, also was paid in full (US$1.3 billion).

Mantega said that the decision by the U.S. court may compromise future restructuring of the debts and that the decision should be met with reaction from the international community. “The International Monetary Fund (IMF) for example has already criticized the position, since it will make it more difficult for the entity to conduct other debt-restructuring programs,” said the finance minister.

For Mantega although negotiations have stalled, there is still room for a solution. “It is better for creditors to receive part of debt than nothing at all,” he concluded.

Read more (in Portuguese).

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