Argentina, fighting to stabilise its economy, obtained a deal on Thursday to clear nearly $10 billion in debt arrears from official creditors in The Paris Club.
The representatives of Paris Club creditors and Argentina "agreed on an arrangement to clear debt in arrears due to Paris Club creditors over a five-year period", the club said in a statement.
Analysts commented that the deal was a positive step towards orthodox economic policy, but that the economy was in a precarious state.
Under the terms of the deal, which covered total arrears of $9.7 billion (7.1 billion euros), Argentina would repay a minimum of $1.150 billion by May 2015, with the next payment due by May 2016, the club said.
"Realisation of initial payment under a formal commitment of Argentina to fully clear its arrears is a necessary and important step for the normalization of financial relationships between Paris Club creditors and Argentina," the club said.
Argentina was represented in the negotiations by Finance Minister Axel Kicillof, a key member of the centre-left government.
The government of President Cristina Kirchner, who has headed the country since 2007, had announced in 2008 that it wanted to pay back the debt inherited from the 2001 crisis when the country defaulted on its payments.
"The Argentine government’s deal to settle its debts with the Paris Club will not in itself change much on the ground," commented David Rees, emerging markets economist at Capital Economics in London.
"But it marks another positive development in policymaking since the turn of the year as the authorities battle to stave off a balance of payments crisis."
He said: "Financiers from the Paris Club nations will now be able to offer trade finance to Argentine exporters, but this does not appear to have been a major constraint on trade."
Rees commented that the agreement was another positive step by the government since January but that the economy was in a precarious state and may have slipped into a technical recession in the first quarter.
- US court ruling looms -
"Faced with rapidly declining foreign exchange reserves, the authorities have embarked on a new, more orthodox approach to policymaking," he said.
Noting that the peso had been devalued by 20 percent against the dollar in January, he said that the deal with the Paris Club was "a necessary condition for the government to return to international capital markets."
But, referring to investors who had not accepted default terms in 2001, he warned: "There is still a major sticking point over how to deal with the remaining hold-outs from 2001's default.
"The government has been ordered by a US court to pay $1.5 billion and is currently awaiting an appeal. If the ruling is upheld, it threatens to push the government into a technical default."
At British consultants IHS, Laurence Allan, the head of Latin America risk analysis, said the agreement was "a big boost to credibility" and was part of a "strategy to build a strong perception that Argentina is a more predictable country."
But "investors will want to see if the government really does what they said they want to do."
Referring to the outstanding debt default dispute before a US court, he commented that the deal would help Argentina to argue that it was not a country which just abandoned debt.
However, the "impact of any judgement in the United States is far more important" than the deal with the Paris Club, he said.