The Argentine government's announcement that it is unable to begin the debt exchange offer on November 29 has now been followed with two further postponements: first to January 17, 2005 and now to February 25 2005.
There are a number of downside risks for the Kirchner administration. Given potential volatility in capital markets, global liquidity conditions could change quickly. They are now favorable to the Argentine government; they may not be in late February next year.
While the multilateral agencies have been extremely patient with Argentina, that may change with new conditions in Washington, DC - possible changes at Treasury, for example. It is also the case that further delays in the exchange - given that we have seen three different dates one must be somewhat skeptical that we have seen the last - could sharply reduce the recovery values for defaulted bonds.
The possibility of an increase in international interest rates cannot be overlooked in 2005 with serious implications for the Argentine position. And, finally, one cannot rule out the possibity that a large portion of Argentina's creditors will refuse to go along with the deal and will turn the dispute over to their lawyers. The country then faces months or years of protracted litigation that precludes any resolution of the privately held bonds and postpones much needed capital inflows - private and multilateral.