The Argentines had fun at the IMF/World Bank meetings in Dubai. First off they secured a $12.55 billion three-year standby credit from the IMF – enough to keep the country current on debt service to, well, the IMF. This was controversial enough, mainly for the near total absence of conditions to which the agreement holds Argentina’s government, beyond that of running a 3% of GDP primary surplus in 2004. “It’s not a dollars and cents programme,” said a rather defensive Anoop Singh, director of the IMF’s western hemisphere department.
The meetings were abuzz with talk of abstentions by country representatives on the IMF executive – approval is normally unanimous – in protest at the signal it sent to other troubled sovereign creditors of excessive official sector indulgence.
The Argentines defended the absence of precise numbers, saying this was an unusual deal in advance of debt restructuring negotiations with private creditors. “That is a more important negotiation than with the IMF,” a central bank source said.
A greater controversy blew up as Argentina launched these negotiations with bondholders. It proposed to restructure $94.3 billion of bonds issued before 31 December 2001, in 152 issues covering seven currencies and eight governing laws. There has never been a restructuring to compare in sheer size and number of small holders.
Argentina wants to exchange these outstandings into a small number of new bonds in a way that would reduce 75% of the nominal stock of eligible debt.
Investors were furious. As the Argentines explained details to the press, representatives of bondholder groups gathered to vent their rejection.
So is the 75% figure an opening negotiating position? Guillermo Nielsen, Argentine secretary of finance and chief debt negotiator, replied: “We did not come here to lower that offer but to share with you our idea for guidelines for debt restructuring.” So is he ready to face a blizzard of lawsuits? Suddenly, talking seemed preferable. “We believe the place to resolve this is not the courts but the negotiating table.” Ah.
The press conference grew heated. Did Argentina’s delegation know that analysts at the leading banks – the country will invite 12 to manage the exchange – were saying it was unworkable? “That’s interesting because they’re approaching us to work on it,” said one official.
An angry Nielsen swept out of the meeting as TV cameras were thrust in his face. “We’re finished here,” he spat.
We’ve scarcely even started.
