Argentina ‘must talk to IMF’

Funding crunch could force rapid conciliation, experts say

  • By Thierry Ogier
  • 29 Mar 2009
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Argentina may be forced to consider going back to the IMF for funding in the medium term, sources in political circles in Buenos Aires say.
Many observers believe that, while a new debt default may not be imminent, the intensity and the length of the global financial crisis may nonetheless force the Argentine authorities’ hand.
“In the end they will get closer to the Fund, especially if there are some changes in the conditionalities,” Miguel Kiguel, a former Argentine finance secretary, told Emerging Markets.
“There will not be a default this year,” said Kiguel. “But if [the authorities] do not do anything to improve relations either with private investors or with the IMF within the next five years, there will be a problem. Economic conditions are deteriorating rapidly.”
Current debt obligations include a $2.5 billion Boden 12 bond amortization in August, and $1.9 billion in GDP warrants in December 2009.
Nicolas Eyzaguirre, director of the IMF’s Western Hemisphere Department, refused to be drawn on whether Argentina would need IMF funding, but warned that irresponsible policies could cost the country dearly.
“Whether they will have enough financing or not will depend on what policy measures they implement today. It’s a fact they’ve been hit hard – especially in manufacturing and commodities,” he said. “They will have to adjust to less income.”
Argentina would not be eligible for the flexible credit line announced last week by the Fund, due to its economic policy record, and there would be other preconditions.
Kiguel noted that a programme with international financial institutions “would be unthinkable as long as Argentina does not change the way it manipulates the statistics.” Official inflation figures have been contested by independent economists in recent years , but the government is now also being widely accused of tampering with unemployment and growth figures.
Argentina posted a 7% growth last year, following 8% average annual growth over the five previous years. But economic activity has been decelerating sharply since the last quarter of last year.
Recent attempts to pay back a $6 billion debt to the Paris Club and to
normalize relations with bond holders that rejected the terms of the 2005 debt restructuring have failed, after the government decided to nationalize the pension fund industry in order to finance public spending. Still, some government officials are ready to adopt a more conciliatory tone with the international financial community.
“I know [many] people in Argentina would like to do this, including some people in the government,” said Frederick Jaspersen, Latin America economist at the Institute of International Finance (IIF).
“There are certainly people in the Central Bank that would like to see this normalized. The deterioration in the global financial situation has made it more difficult for Argentina to settle up, but it needs to do so. It is an example of a country that needs to think seriously about complimenting efforts to regain access [to international capital markets].”
A spokesman for Martin Redrado, governor of Argentina’s Central bank, has declined to comment.
  • By Thierry Ogier
  • 29 Mar 2009

All International Bonds

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4 Goldman Sachs 171,499.26 554 6.03%
5 Barclays 169,046.60 646 5.94%

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4 BNP Paribas 19,315.94 110 5.26%
5 Credit Agricole CIB 18,706.93 106 5.09%

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