(Bloomberg) -- A US judge ordered Argentina’s La Rioja province to pay creditors nearly $40 million in damages for failing to make a series of interest and principal payments on its debt.
The ruling, filed in a New York federal court on Wednesday, is linked to the province’s international dollar notes on which it defaulted in February and August.
La Rioja failed to make the payments as its finances buckle under the strain of President Javier Milei’s austerity package and a slump in economic output. The situation has got so dire that the province resorted to creating its own currency to help pay bonuses to its workers.
See: New Argentine Currency Launched to Offset Milei’s Shock Therapy
La Rioja’s government didn’t immediately respond to a request for comment, while a spokesperson for the ad-hoc bondholder committee declined to comment.
Ricardo Quintela, La Rioja’s governor and one of Milei’s fiercest detractors, has blamed the president’s cuts in federal aid for the province’s financial woes. The region was one of the most reliant in Argentina on transfers from the national government.
As a consequence of the president’s “shock” economic therapy, La Rioja’s revenue tumbled 27% in the first quarter compared with the same period a year ago, according to estimates from Buenos-Aires based brokerage firm Facimex.
To be sure, Milei’s cuts to state funding, while sending La Rioja into distress, has not strained the finances of other Argentine states as much.
A grouping of 14 provinces with foreign bonds outstanding, reported a primary surplus of 16.9% of total revenue for the first three months of 2024, up from 9.5% in the year-earlier period, according to data from the country’s Economy Ministry and by BancTrust & Co.
La Rioja’s 8.5% dollar note due 2028 last changed hands at around 57 cents on the dollar, according to pricing data compiled by Bloomberg.
The case is Beauregarde Holdings LLP et al v. Province of La Rioja, 24-cv-02955, U.S. District Court, Southern District of New York.
(Updates with response from bondholder committee in fourth paragraph)
©2024 Bloomberg L.P.