FT: Argentina defiant towards private creditors

Adam Thomson in Buenos Aires and Andrew Balls in Washington  
15th March, 2004

Argentina said on Wednesday it would meet private creditors this month to begin talks over restructuring about $100bn (€81.7bn, £55.4bn) of defaulted debt but warned that it would not modify its original offer.

In defiant tone, Alberto Fernández, Argentina's cabinet chief, said the government planned to stick to its offer, made in Dubai last September, to write off 75 per cent of the nominal value of the debt. Creditors have rejected that offer, claiming it amounts to an unacceptable 10 cents in the dollar calculated on a net-present-value basis.

"Argentina has fixed the 75 per cent write-off with the absolute conviction that that is what it can reasonably honour, and honour without placing in jeopardy the present and future generations of Argentines," he said in a press conference.

His comments, which will doubtless be coolly received by the country's roughly 700,000 retail and institutional investors around the world, came just minutes after the Argentine government signed a letter of intent with the International Monetary Fund linked to the second review of its three-year programme.

Argentina had threatened to default on a $3.1bn payment to the fund unless the approval of the review was forthcoming.

Neither the fund nor the Argentine government made the letter of intent public on Wednesday - Roberto Lavagna, Argentina's economy minister, said it would only be published on March 22, the day the fund's executive board is scheduled to give formal approval of the review.

However, Mr Lavagna said Argentina had managed to avoid including a specific target figure for participation rates of bondholders in an eventual restructuring offer. It is thought the fund wanted Argentina to establish a minimum level of as much as 80 per cent. "Argentina's position prevailed," said Mr Lavagna.

In Washington, however, IMF management expressed optimism that Argentina would finally make some headway in restructuring its debts almost two years after the country announced the biggest sovereign default in history.

Anne Krueger, acting managing director of the IMF, said: "The authorities will work with the assistance of investment banks to establish a timetable and process that will ensure meaningful negotiations with all representative creditor groups."

An executive director of the IMF told the FT: "We are hopeful that from now on real good-faith negotiation will begin. Since the agreement was signed in Dubai in 2003 this has not been the case. Negotiations mean that both sides listen to each other. We will see if that is the case now."

Indeed, despite the comments of Mr Lavagna and Mr Fernández, further details of the letter obtained on Wednesday by the FT seemed to confirm that Argentina had in fact ceded ground on a number of points related to the treatment of its creditors.

The letter states, for example, that the Argentines will engage in constructive negotiations with all creditor groups - language Buenos Aires had previously resisted. The Argentines are expected to formalise their offer to the creditors no earlier than June and no later than August.