Argentina clinched a landmark deal on Thursday to repay billions of dollars in outstanding debt, a critical step toward normalizing relations with creditor nations and clearing the way for much-needed international financing.

Argentina, which has been blocked from capital markets since its whopping $95 billion default in 2001, agreed to settle $9.7 billion in arrears with the Paris Club of creditors over a five-year period.

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

Analysts believed Argentina walked away from the deal favorably as Paris Club members, which include Germany, Japan and the US, among others, agreed to let Buenos Aires send a first installment of at least $1.15 billion by May 2015.

The deal should help Latin America's No. 3 economy buck its pariah status among international lenders and make it easier for foreign investors to park their money there.

Argentine President Cristina Fernandez de Kirchner (pictured above) has tried before to reconcile the country's debt. In 2008, her government was in negotiations to pay back the Paris Club but backed out at the last minute when Lehman Brothers collapsed out of concern for Argentina's falling foreign exchange reserves.

Argentina's foreign reserves have plummeted 27 percent in the past year to about $28 billion.

cjc/kpc (Bloomberg, Reuters)