The La Rioja government has alerted the market that it is unable to fulfill its debt obligations amounting to US$ 26.2 million. It attributes this inability to high inflation, devaluation, and the purported withdrawal of co-participable funds. This announcement comes amidst a heated dispute between the national government and provincial governments over discretionary fund transfers. It also follows the recent approval by the province, under the leadership of Ricardo Quintela, of a quasi-currency provincial, dubbed the “Chacho”.
In a public statement, the province admitted it faces constraints in paying the principal and interest due by February 24, 2024, on international bonds maturing in 2028. The province is therefore exploring the best strategies to manage its financial obligations.
La Rioja had been scheduled to make payments of US$26.2 million last Saturday.
This public debt derives from a green bond issued in 2017 worth US$200 million, carrying an annual interest rate of 9.75%.
In a letter penned by the Minister of Finance, Jorge Quintero, he stated that La Rioja is grappling with “unprecedented economic challenges.”
He attributed these challenges to the shrinking Argentine economy, high inflation, and currency devaluation which have severely impacted the provincial economy and caused a steep decline in provincial tax collection.
Quintero also pointed out that the province has been denied the co-shareable funds as stipulated in Art. 83 of Law 27,701. He was referring to the 2023 national budget, reconvened for 2024, which has left the province’s income insufficient to cover expenses related to essential services and programs.
Quintero noted that these factors have seriously hampered the province’s ability to meet its financial obligations, including the Bonds.
In response to this financial predicament, the province has engaged financial and legal advisors and plans to begin discussions with bondholders to reach an amicable agreement as soon as possible.
The province, following preliminary talks with investors, has pledged to do its utmost to pay the interest due by February 24, 2024, as quickly as possible.
The La Rioja Government contends that the national government has accumulated a total debt of $302,885 million with the province. This claim was formally submitted to the Supreme Court of Justice last week, along with a request for a Declarative Action of Certainty regarding the invalidity of DNU 70/2023 and an injunction against the non-payment of trust funds.
