MercoPress. South Atlantic News Agency

“Complex” negotiations, but should be agreed by late 2004.

Argentine authorities admitted the complexity of negotiations with private creditors holders of 94,3 billion US dollars in defaulted bonds, but also believes an understanding can be reached by late 2004.

"This is the greatest debt negotiation ever. Negotiations are not an exact science, so we can't anticipate a fixed timetable but we're doing our best to have them over by late 2004", said Argentine Finance Secretary Guillermo Nielsen in Dubai where he's participating in the annual IMF-World Bank assembly.

"We're breaking ground, there's no road map, we're doing our best, but much will also depend in the willingness of creditors", added Mr. Nielsen who is head of the Argentine debt negotiating team. Creditors are organized in four main consulting groups located in New York, Italy, Germany and Japan.

Mr. Nielsen underlined that because of the dispersion of bond issues, as a consequence of the erratic and dreadful layout of maturities during the nineties, "we're bound to run into non constructive situations in some moment of the negotiations".

"The problem we have is that the different Argentine bonds were issued subject to eight different legislations which mean that in some cases such as Germany, an agreement can only be reached with 100% of bond holders. This complicates things very much", insisted the Argentine official. Actually 17% of defaulted bonds are subject to German legislation.

This Monday in Dubai Argentine Economy Minister Roberto Lavagna officially presented private creditors a 75% face value write-off proposal for the rescheduling of the defaulted debt extending to December 31, 2001 equivalent to 94,3 billion US dollars.

This figure does not include the 15 billion US dollars in interests since January 2002 that remain unpaid. However bonds issued since January 2002 (when former president Eduardo Duhalde was nominated by Congress) will continue to be strictly honoured, emphasized Mr. Lavagna.

Another area of contention besides overseas bond holders are the Argentine retirement funds, AFJP, that had portfolios with a significant percentage of the defaulted bonds. The nominal 75% write off means that individual accounts of pension savers have dramatically dropped and they are now demanding compensation.

However Argentine authorities have pointed out that the rescheduling proposal is a mix of the bonds' face-value, interest rate and maturing dates, "which in the case of AFPJ means nominal value can be respected if they accept a bond exchange with longer term and lower interest rate".

"AFJP will be treated as all other creditors and they will receive no specialm compensating", said Mr. Nielsen.

Interest rates in the defaulted bonds issued in foreign currencies range between 7 and 15%, revealed Argentine officials.