BUENOS AIRES — Argentina missed a bond payment on Friday and inched closer to another crushing default, which would plunge it into a new period of economic isolation and deepen a recession that has been exacerbated by the coronavirus pandemic.
The missed deadline means Argentina has technically entered default for the ninth time in its history. But the government signaled that it was making progress toward a deal with creditors to restructure $66 billion in foreign debt and announced that negotiations would continue until June 2.
President Alberto Fernández downplayed the missed payment and said the government would not accept a deal that deepens the economic pain for Argentines who have seen their earning power decimated by the pandemic.
“I want the world to see us as an honorable country that fulfills its commitments,” he said in a speech on Thursday night.
Argentina’s last defaulted on its debt in 2014, and its long history of spending beyond its means and defaulting on loans has given it a reputation as a deadbeat. But its current efforts to negotiate an advantageous restructuring of its debt have drawn broad support by prominent figures including Pope Francis and Senator Elizabeth Warren of Massachusetts, a lawyer and recognized expert on bankruptcy and commercial law.
“With Covid-19 worsening an already weak economy, this is no time for Wall Street creditors to exploit any country struggling to deal with debt burdens,” Ms. Warren wrote on Twitter recently. “A fair deal will help save more lives.”
A group of 138 economists, including the Nobel laureates Joseph Stiglitz and Edmund Phelps, signed an open letter urging Argentina’s creditors to come to an agreement with the cash-strapped country. The International Monetary Fund has also expressed optimism about the negotiations to restructure Argentina’s debt, which it has characterized as “unsustainable.”
Argentina’s economy minister, Martín Guzmán, who is leading the negotiations, expressed optimism that the country would avoid a prolonged default.
“Argentina is holding constructive negotiations with its creditors,” he said in an email. “The positive thing about all this is that there is a willingness from all sides to seal a deal, now the agreement needs to be an agreement that is sustainable.”
Hans Humes, the C.E.O. of Greylock Capital Management, who is involved in the negotiations, said Thursday during a panel discussion hosted by the Wilson Center that the consequences of Argentina technically slipping into default on Friday would be minimal in the short term.
“There should be enough flexibility to get to a deal that’s acceptable,” he said, sounding upbeat about the ongoing negotiations.
The government’s initial offer to creditors, which was roundly rejected, called for a three-year grace period on future payments, a 5.4 percent reduction in the loan balance and a 62 percent cut in interest payments.
Argentina had initially offered to pay about 40 cents on the dollar, while creditors demanded 60 cents. Analysts say the two sides appear closer to accepting a midpoint between 50 and 55 cents.
Argentina’s economy, which has been in a recession for more than two years, took a major hit after the government imposed a strict lockdown in mid-March to curb the spread of the coronavirus.
Analysts said there would be no significant consequences to Argentina missing the Friday deadline.
“A soft default doesn’t look like such a negative scenario compared to what we’re dealing with today,” said Todd Martinez, an expert on Argentina at Fitch Sovereign Ratings Group. “In practice, not a lot changes, although it may have some psychological impact.”
But if talks break down in coming days, Argentina will face a new, lengthy period of economic isolation and contraction.
“If it extends for a prolonged period of time, that is when you will start seeing difficulty to access credit for companies and people, as well as complications in the exchange market and inflationary pressure,” said Daniel Marx, a former finance secretary who heads Quantum Finanzas, a consultancy.
Although polls show that Argentines would rather not fall into default, the issue has not dominated the news in recent days.
“I’m really not following it,” Victoria Ferreira, a 37-year-old venue manager, said. “I’d rather worry about things I can solve.” Living in Argentina, she added, means there is always “a context of uncertainty.”