Argentina yesterday reached an agreement with the Paris Club over repaying overdue debts in a landmark deal that could open up much-needed international financing for the country, the group of creditor nations said.

The agreement will allow Argentina to clear debt in arrears that stood at $9.7 billion as of the end of April over a five-year period, the group said in statement after negotiations that dragged into the early hours.

Offering the country some breathing room, the agreement calls for a first instalment of at least $1.15 billion due by May 2015, followed by another payment within a year.

The dispute is the legacy of Argentina’s 2001/2002 default on roughly $100 billion, which left the country largely cut off from international capital markets.

“Paris Club creditors welcomed progress made by the Argentine Republic towards the normalisation of its relations with creditors, the international financial community and institutions,” the group said in a statement.

“Realisation of initial payment under a formal commitment of Argentina to fully clear its arrears is a necessary and important step for the normalisation of financial relationships between Paris Club creditors and Argentina,” it added.

The group also said the deal cleared the way for export credit agencies of its members to resume doing business with Argentina, which should ease making foreign investment in the country.

Argentina needs such investment to help develop its vast but underdeveloped Vaca Muerta shale field and foreign investment could prompt a revival in Latin America’s No. 3 economy, which faces a decline in output.

Germany is Argentina’s biggest Paris Club creditor with about 30 per cent of the debt, followed by Japan with about 25 per cent. Smaller holders include the Netherlands, Spain, Italy, the US and Switzerland.

The country’s history with the informal group of mostly Western nations goes back to the Paris Club’s origins in 1956, when Argentina agreed to meet its public creditors in Paris.