Argentina is under attack this weekend as private creditors, government leaders and multilateral institutions urge the country to achieve a quick resolution of its restructuring of $100 billion of defaulted debt.
Yesterday, the International Institute of Finance weighed in with a call to strengthen crisis prevention in emerging markets and reach consensus on a framework for voluntary, market-based solutions to financial crises which would "demonstrate that Argentina is an isolated case". The IIF, an international banking lobby group, is promoting a so-called code of conduct that would seemingly curb defiance by borrowers and maintain dialogue between creditors and insolvent countries.
Argentina is seen as a rogue borrower by the international financial community for defaulting on sovereign bonds and making tough offers to bondholders that would pay them 25 cents to the dollar on the nominal value of their bonds. (Banks calculate that factoring in GDP ratios, the offer could reach a value of 28 cents on the dollar.) Argentina's economy is growing at a robust rate of about 7% this year, just below last year's 8.8%. These follow a contraction in GDP of 4.4% in 2002 and of 10.9% the year before.
At the IIF press briefing, Bill Rhodes, senior vice chairman at Citigroup said: "The private sector, bondholders and Argentine government are presently looking toward some sort of dialogue, we're waiting to see what happens - we're looking for negotiation in coming months."
On Friday, Argentina took a chiding from the G7 finance ministers. "We urge the Argentine authorities to implement, as soon as possible, the prior actions required for the completion of the Third Review [by the IMF]," said the world's leading finance ministers in their communique. One of the three key challenges facing Argentina, they added, is "achieving high creditor participation in a sustainable debt restructuring."
Argentina was also the subject of debate at yesterday's meeting of the International Monetary and Financial Committee where, sources say, strong language was used on the debt situation. When a disgruntled-looking Roberto Lavagna, Argentina's finance minister, strode hastily across the street from the IMF to the World Bank building at about 2:30 pm, he replied tersely to reporters' questions about the references to Argentina in the forthcoming communique. "Wait to see the final communique," he said. The Argentine delegation has been elusive during the meetings, avoiding encounters with the press.
The Brazilian Finance Minister Antonio Palocci was said to have intervened to achieve a more moderate tone in the IMFC statement on Argentina. In an informal conversation with the press, Palocci would not confirm that he acted to smooth the language adopted towards Argentina. The final text of the IMFC communique said: "We welcome the efforts by Argentina towards completing a comprehensive and sustainable debt restructuring and hope for an expeditious conclusion to the process."
Bondholders are less guarded in their criticism of Argentina which has said it will not improve the latest offer, made in June. "Argentina wants the biggest debt relief ever without negotiating the offer made in June, which is unacceptable," Stefan Engelsberger who represents 209 bondholders in Europe holding $200 million, told Emerging Markets.
"We, the bondholders, are the collateral damage of the IMF which is thinking about its mistakes," says Engelsberger, citing a recent independent evaluation commissioned by the IMF to analyze its errors made in Argentina. Retail bondholders remain enraged by the Argentine posture.
"Argentina doesn't seem to care about creditors, what they seem to respond to is litigation and pressure from the official sector," says AJ Mediratta, a Bear Stearns official and financial adviser to the Global Committee of Argentine Bondholders, a group holding about $38 billion.