Argentina’s finance minister, Amado Boudou, said yesterday that he hopes to reach an agreement with the Paris Club of creditor nations by the end of the year. Negotiations resumed late last year on some $7 billion of Argentine debt arrears.
Talks are going “very well”, Boudou told reporters. “We see these negotiations very positively. We are looking forward to resolving this issue this year before the end of this government,” he said.
But foreign investors remain divided over Argentina’s willingness to make further progress in talks with the Paris Club.
“They need to square the numbers with the Paris Club,” Guillermo Mondino, head of emerging market research at Barclays Capital, said. “Argentina would like to pay within five or six years, whereas the Paris Club is eager to receive its due payments within 18 months.
“There may be a window of opportunity until May or June, but I doubt there will be an agreement before the [October presidential] elections.”
Others sounded even more negative. “There is no real room for compromise,” Edwin Gutierrez, an emerging market debt manager at Aberdeen Asset Management said.
Negotiations have to be handled very carefully, the Institute of International Finance said in a report issued yesterday. “If negotiations to clear arrears were to proceed, the Club would have to decide whether it will uphold ‘comparability of treatment’ that is designed to ensure that no group of creditors be treated preferentially,” the report pointed out.
Meanwhile, Argentina is expected to stay away from the international capital markets. “Argentina does not need financing,” Boudou said, ruling out any bond issue.
The Argentine government has also agreed to receive an IMF technical mission next month, to advise local authorities on a new inflation index that would restore credibility to official statistics.
Inflation is at the core of a controversy that has lingered since 2007, when the Argentine authorities intervened in the official statistics institute to change the methodology used to calculate the consumer price index.
This has led to large discrepancies between official figures and market estimates. For example, the government posted inflation of 11% last year, compared to market estimates of more than twice that amount, such as the figure of 24.4% issued by FIEL, a consultancy.
The Argentine government has recently sued consultancies that it accuse of issuing inaccurate or biased indices.
The IMF mission will be in Argentina between April 4 and April 11, shortly before the IMF Spring meeting takes place in Washington, but its advice will be non-binding and the government will decide whether to implement it or not.
Mondino at Barclays said: “This does not mean that the government has yet made up its mind about actually getting along with this.”
A first IMF mission visited Argentina late last year. In this context, the decision to proceed with the technical assistance mission can be seen as “a step forward in the long process”, according to Mondino.
Nevertheless, a senior IMF official preferred not to raise the stakes too high. “There is nothing new under the sun,” said Nicolas Eyzaguirre, IMF Western hemisphere director. “We are doing what we said we would do.
“Let us wait until the end of the exercise to figure out what we are going to recommend, then we can make an assessment of the feasibility of the changes.”