When Argentina needed to raise money last year, it could not easily convince investors to buy its credit. Though usually it is one of the busiest Latin American borrowers, with annual funding needs of around $10 billion, investors were not well disposed towards emerging markets generally. And Argentina, already at a low Ba3/BB rating, faced further possible downgradings. It had been hit by a recession, high funding costs, and a presidential election to be held in October. To make matters worse, in June Peronist party candidate Eduardo Duhalde spoke of not repaying all of the country's debt. Though he quickly reassured investors that he did not mean that Argentina should default, a tremor of unease passed through the international bond markets.
Argentina struggled to meet its funding needs by issuing a domestic bond here and a small Eurobond there. But its most important source of funds, the US dollar market, was eVectively closed after its last bond in April 1999. Yet, on October 7 1999 the sovereign produced a $1.5 billion oVering at near impossible prices ranging from 250 basis points to 470bp over US Treasuries over a range of maturities. A $250 million guarantee by the World Bank made it possible.