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Argentina: Debt restructuring holdouts happy to wait

The Argentine government under the leadership of Cristina Kirchner will have to reach a resolution with the holdout investors from the sovereign’s debt restructuring of 2005 if it is to avoid financing issues, according to analysts.

Up to now the government has relied on local market funding and money raised through bond sales to Venezuela to meet its financing needs. However, questions are beginning to be asked about how long that strategy can work.

"So far [Hugo] Chávez [Venezuela’s president] has been a very good window for Argentina to get financing but eventually this will not be enough," says Walter Molano, head of research at BCP Securities. "There has to be some sort of resolution to this external debt problem during the current administration. It is likely to get nasty but it has to be sorted out soon."

Venezuela has bought a total of about $4 billion of Argentine debt in recent years. But according to a report last year by leading research firm RGE Monitor, the country will have to consider a return to the capital markets if the economy begins to slow down and its financing needs grow. "The government may need to access capital markets by 2009 in amounts that require a fluid and coherent interaction with the potential investor base," says the report, which adds that the sovereign’s financing needs could reach $10 billion in 2009 compared with $5 billion in 2007.

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