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Boudou confirms that Argentina has postponed outreach to the Paris Club
El Cronista
August 09, 2010

EL CRONISTA Buenos Aires

Despite good external conditions, from the recovery of bonds and the fall in interest rates that investors are demanding of Argentina to lend it money, the government is deciding to wait. Yesterday, Economy Minister Amado Boudou confirmed that the Palacio de Hacienda is letting it be known until then: that negotiations with the Paris Club to pay off the debt of US$6.7 billion is on hold and that they will "continue to stretch out."

The negotiations with the group of creditor countries is held up because Argentina wants to pay in installments without the participation of the International Monetary Fund (IMF), something that the countries reject. The plan to normalize that debt, in default since 2001, is therefore paralyzed waiting for the political decision to move ahead.

But that decision reemerged after the swap of unpaid debt. The advance draft of the Budget sent to Congress last month included again the classic intention to renegotiate those balances. And Boudou confirmed the lack of progress: "We're going to continue stretching it out on making the decision until when we think that it would be the best time for Argentina."

Since Boudou took control of the economic team, he has flirted with a deal with the Paris Club. The intention of the government was to get the G-20 to take the role that the group of creditor countries assigns to the IMF, whose backing is required for an installment agreement. But the G-20 countries which are part of the IMF, and many of them also the Paris Club didn't back the proposal.

The Paris Club negotiation centers around bringing cheap credits to businesses in the member countries of that entity.

Lower country risk

It is precisely the possibility of fixing a benchmark interest rate for the private sector that, Economy says, is pushing the government to seek US$1 billion on the financial markets at the lowest possible interest rate. For that, the Palacio de Hacienda is postponing the emission of Global 2017 bonds, despite that the interest rate has already fallen to one digit and country risk has fallen to its lowest level in two years (it hit 653 points and closed at 671).

"We will continue to monitor the situation, we can stretch it out a bit more. In Argentina there is a new circumstance, and it's that we don't run like crazy to ask the world to lend us money," Boudou said in Tandil.

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