East-West Debt july 2004 news, Emerging Markets update : ARGENTINA
Creditors are losing
patience with Argentina
The international community
is expressing more and more
frustration about Argentina’s slow
progress in restructuring some
US$ 100 billion in defaulted debts.
Various discussions have been
held on a high political level concerning
this debt default controversy
that is overshadowing the country’s
slow exit from its deepest economic crisis in decades.
President Kirchner has been
urged to modify his proposal to
repay creditors less then 10 cents
on the dollar in net present value
terms, which bondholders strongly
reject. Argentina is also facing
intense pressure from the International
Monetary Fund. Reflecting
the growing international impatience,
8 of 24 board members
abstained from voting when the
Fund approved a review of its loan programme.
In addition to this, US courts
have cleared the way for bondholders
to identify state-owned
commercial assets subject
to seizure, including the
ambassador’s residence in
Washington DC.
Kirchner thus far doesn’t
seem to be impressed. At a political
rally, he told supporters
that paying back more than his
government is proposing would
be the equivalent of genocide
against the people. Economy
minister Roberto Lavagna has
admitted that “a poor image
abroad isn’t helpful”. But he
also warned that “we won’t
agree to any restructuring that
sacrifices growth or precipitates
another crisis down the road”.
As proof that Argentina was
negotiating in good faith,
Mr Lavagna cited the recent
designation of three banks -
Merrill Lynch, Barclays Capital
and UBS - to help sell its restructuring
to some 450.000
bondholders worldwide.
Recently, Argentina’s financial
representative in Washington
invited investors to visit the
country’s slums to experience
the poverty at first hand. That
provoked comments amongst
the creditors that they “are not
the Red Cross”.
Argentina’s debt restructuring
is widely expected to be the
most complicated ever undertaken.
In 2001, the country posted
a record sovereign debt
default on US$ 141 billion.
Debt undertaken with foreign
creditors includes 152 bonds
series in seven currencies and
many jurisdictions around the
world.
The Argentine economy
plunged into disarray in December
2001 amid deadly street
riots and political upheaval that saw five presidents in a matter
of weeks. The downturn continued
in 2002 but the economy
began growing again in 2003,
even though the jobless rate
remains in double figures and
nearly half of the 36 million
population is still mired in
poverty.
The 8,4 % GDP growth last
year has made it relatively easy
for its private sector to get by
without large amounts of
foreign investment. Foreign
lenders are reluctant to finance
Argentine companies while the
country is in default, and will only
lend money for short periods at
very high interest rates.
Still, Argentine companies at
some stage are likely to return
to the capital markets, which
could put pressure on the
government to placate foreign
creditors, if it hasn’t already
done so. Analysts expect that
when the economy slows, the
domestic pressure on the
government to restructure the
debt will increase to allow the
private sector to access capital
on reasonable terms. As Argentina’s
only current source of
external financing, the IMF has
now been thrust into the position
of arbiter in the stalled talks
with bondholders. Although
the country has met with flying
colours its fiscal targets under
the programme, analysts
believe that the government has
failed to comply with IMF’s
condition to negotiate “in good
faith” with creditors.
At the heart of the arguments
is how much Argentina
can afford to pay. The government
insists that increasing this
year’s primary fiscal surplus -
surplus before interest payments
- would jeopardise the
recent return to growth. Yet
with several consecutive months of record tax receipts, investors
and their representatives argue
that it has plenty of money to
improve its offer.
Since a couple of months,
East-West Debt has established
excellent contacts in Buenos
Aires. The booming number of
unpaid creditors has caused
unrest and more and more companies
seek help in recovering
their outstanding claims on
Argentine entities. At this
moment, it is key to keep the pressure fully on the cooker by
taking appropriate legal actions
in order to get a claim taken into
account for a rescheduling or
settlement. Secondly, it offers
companies the possibility to be
in a privileged position in case
talks and negotiations fail.
 FRAUD IN THIRD PARTY TRANSPORT DOCUMENT
ARGENTINA
IRAQ
LYBIA
SYRIA
CONGO
IRAN
KENYA
MOLDOVA
DOMINICAN REPUBLIC
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