Early this morning, the lower house of the Argentine Congress passed a bill that will allow for the restructuring of its sovereign debt. After entering into session Wednesday afternoon, members passed the law Thursday morning with a vote of 134 to 99, just over the 129 votes needed for its approval.
The vote comes after the United Nations General Assembly overwhelmingly approved a new resolution on Tuesday in favor of protecting countries’ ability to restructure sovereign debt, with 124 countries in favor, 11 against and 41 abstained. The United States was one of the few countries that voted against the measure.
Argentine Foreign Minister Hector Timerman expressed his approval of the UN result. “The time has come to give a legal framework to the financial system for restructuring sovereign debt that respects the majority of creditors and which allows countries to come out of crises in a sustainable manner,” he said.
After entering into selective default on its debt on July 30, the new law will help Argentina pay back its creditors before its new September 30 payment deadline by allowing the payment site to be moved from New York to either Buenos Aires or Paris. However, New York District Judge Thomas Griesa—who froze $539 million in Argentine deposits in the Bank of New York Mellon and ordered the country to repay hedge funds in full before paying back creditors—has declared the law illegal and threatened to take legal actions against it.
Not everyone in Argentina is in favor of the new bill though. Alfonso Prat Gay, former president of the Central Bank of Argentina, stated that “the fight with the holdouts will be tremendously negative for the country’s future.”
U.S. Deputy Representative to the UN Economic and Social Council Terri Robl also expressed his concerns about the consequences of the new bill. “If lenders face higher uncertainty regarding repayment they may be less likely to provide financing and will likely charger higher risk premiums, potentially stifling financing to developing countries,” he said.