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Argentina defaulted on Friday for the second time in less than 20 years after failing to pay $500 million of interest on its bond debt, but it continues to negotiate a restructure with creditors, Finance Minister Martin Guzman said.
"There is still a significant distance to go but, more importantly, all sides remain at the table to find a solution," he said.
The default – Argentina's ninth overall – was widely expected after the economic ministry announced on Thursday that it was extending, for a second time, talks with international creditors on restructuring $66 billion of its debt. The new deadline is June 2.
President Alberto Fernandez's government is expecting to come to an agreement before Argentina suffers the full effects of its default.
Thursday's announcement of the extension "provides flexibility in case the Republic decides to make modifications in the coming days to ensure a sustainable agreement with our creditors," Guzman said.
The crisis-wracked South American country, which has been in recession for two years, currently owes $324 billion, amounting to around 90 percent of its GDP.
The crisis was aggravated when its economy was hit – like others all over the world – by the coronavirus pandemic.
Although it is one of the world leaders in food exports, Argentina has already defaulted eight times in its history, most recently in 2001 when it owed $100 billion.
This triggered a painful social and economic crisis.
Ratings agency Moody's said the default would provoke "significant losses for investors."
"Moody's expects that the panorama for the restructure of Argentina's debt will very probably become more complicated," said vice president Gabriel Torres.
Argentina's main group of creditors is demanding "a direct and immediate discussion" on its restructure plans.
"The group is happy to see that Argentina has expressed its intention to work with the creditors, but actions speak louder than words," said the Ad Hoc group made up of investment funds including BlackRock and Fidelity.
"Over the last month, Argentina has communicated virtually nothing of substance to its creditors."
The Merval index on the Buenos Aires Stock Exchange was down 1.03 percent at the close on Friday to 40,962.76 points. Stocks had risen 3.99 percent throughout the week as negotiations between the governor and creditors continued.
Guzman has taken an aggressive stance on debt, in part driven by a need to free up resources to fight the novel coronavirus pandemic.
Argentina asked bondholders for a three-year grace period on debt repayment, a 62 percent reduction on interest amounting to $37.9 billion, and 5.4 percent on capital — or $3.6 billion.
This was rejected with a counter offer that the government says it is studying.
"If the majority agrees to the exchange, the default will be very short. I don't think there will be a reduction in the letters of credit" that would impede essential imports, economist Marina Dal Poggetto from EcoGo told AFP.