A general view of a street linking to 9 de Julio Avenue is seen with cars as Argentina extends the curfew till 24th of May, imposed since 20th of March, in an effort to stem the spread of the coronavirus (COVID-19) pandemic in Buenos Aires, Argentina on May 21, 2020.

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Argentina has agreed to continue talks with creditors to restructure around $65 billion of foreign debt through to June 2, as Latin America’s third-largest economy seeks to avoid another devastating default.

It comes shortly after Argentina’s Economy Minister Martin Guzman had hinted there was a “big chance” the May 22 deadline would be extended. Nonetheless, a grace period for a $500 million group of interest payments on three foreign bonds remains due on Friday.

Analysts anticipate the recession-hit country will default on these bond payments after an initial proposal by the government was rejected earlier this month. It is thought the impact of that would largely depend on the outcome of restructuring talks now set to continue through to early June.

“Argentina firmly believes that a successful debt restructuring will contribute to stabilizing the current economic condition, alleviating the medium and long-term constraints on Argentina’s economy created by its current debt burden and returning the country’s economic trajectory to long term growth,” the government said in a statement published on Thursday.

“Argentina and its advisors intend to take advantage of this extension to continue discussions and allow investors to continue contributing to a successful debt restructuring,” it added.

What’s going on?

Talks to restructure Argentina’s debt come around five months into President Alberto Fernandez’s administration.

The country’s economy, which was already grappling with a two-year recession, sky-high inflation rates and rising levels of poverty, has been hit hard by the coronavirus pandemic.

To date, 9,931 people have contracted the coronavirus in Argentina, with 416 deaths nationwide, according to data compiled by Johns Hopkins University.

In comparison, neighboring Brazil has recorded the third-highest number of confirmed Covid-19 infections in the world, with over 310,000 cases and 20,047 fatalities.

Argentinas Economy Minister Martin Guzman arrives for a press conference at Casa Rosada announcing measures during the outbreak of the new Coronavirus, COVID-19, in Buenos Aires, Argentina on March 17, 2020.

JUAN MABROMATA | AFP via Getty Images

Speaking during a webcast on Tuesday, Argentina’s Guzman said talks with creditors to restructure around $65 billion of foreign debt “has to be successful for giving Argentina the conditions for being back on its feet.”

Earlier this month, a group of leading economists including Nobel prize-winner Joseph Stiglitz urged bondholders to “act in good faith.” They argued debt relief for Argentina would be “the only way to combat the pandemic and set the economy on a sustainable path.”

It is in this context that talks to restructure Argentina’s debt payments have received international attention.

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