Argentine debt reopening ruled out
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Emerging Markets

Argentine debt reopening ruled out

No hope for $20 billion hold outs despite Paris Club talks, officials say

A senior Argentine economy ministry official has ruled out any deal with holders of $20 billion worth of defaulted bonds, despite the resumption of talks with the Paris Club of creditor nations this week. The bond holders collectively rejected proposed payout terms after the government’s 2001 default, the largest in emerging markets history.

“This is not negotiable and it would be unacceptable for the country [to reopen the exchange],” the economy ministry source told Emerging Markets yesterday. Kenneth Levine, a litigator at Carter Ledyard & Milburn LLP who has been monitoring developments in South America on behalf of clients who invest in the region, said: “Even though Argentina says right now it is not reconsidering paying additional debts, there is hope it will reconsider at a later point when it realizes the importance of such a move to the market overall.

“Its negotiation now with the Paris Club is at least a first step.” Argentine president Cristina Fernandez de Kirchner flew to Paris this weekend, and officials held talks on the restructuring of $6.3 billion of debt with the Paris Club of creditors.

Martin Lousteau, Argentina’s finance minister, told reporters that the meeting at presidential level with French head of state Nicolas Sarkozy highlighted the “qualitative change” in the dialogue with creditors.

Lousteau said: “There were technical discussions with the Paris Club to resume talks on the Argentine debt.” He added that two previous meetings had already been held this year on technical issues. “There were two meetings in February and March, one to present officials, and the other one to discuss the macroeconomic situation of Argentina and its sustainability.”

These preliminary contracts are designed to prepare the ground for a resolution of the issue that drags on since the 2001 debt default. Argentina has identified France, the US and Germany, as the main contacts within the Paris Club. As well as the overtures to France, Argentina is also understood to have engaged in a goodwill exercise with US officials. However, Lousteau rejected any involvement of the IMF at this stage.

Wall Street lawyer Levine commented: “News that Argentina may pay off some of its debt is encouraging, not just for Argentina but for investments in the entire region. “The default was deeply discouraging for investors. While the country had severe economic problems, it also did not negotiate fairly with bond holders and basically forced them into a significant hair cut.

“Bond holders who refused to agree to Argentina’s cuts pressed their legal claims in the US and largely won, but often had a difficult time collecting on their judgments. “We would certainly hope this eventually leads to a settlement of all outstanding claims, which would boost investor confidence, but we will not hold our breath waiting for that.”

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