MercoPress. South Atlantic News Agency

Argentina agrees to make debt payment

Argentina decided at the eleventh hour to make a $3.1 billion payment Tuesday to the International Monetary Fund, government sources said.

The move appeared to be a retreat from a vow by Buenos Aires that it would not pay up unless the Fund said what it wanted to hear. Argentina had been demanding that the IMF say right now that it will certify later this month Buenos Aires' adequate compliance with a debt rescheduling accord signed last September.

According to the sources, Tuesday's agreement avoiding Argentine default came during a half-hour telephone conversation between President Nestor Kirchner and Anne Krueger, acting head of the IMF.

They reportedly agreed that Argentina will make the $3.1 payment, and Krueger will recommend to the organization's board that it approve later this month Argentina's compliance with September's accord.

The sources did not provide further information, but said more would be forthcoming Wednesday from Argentine authorities.

The days leading up to the deadline were characterized by intense and often tense negotiations. Kirchner had been huddled since early Tuesday morning in the presidential palace with Economy Minister Roberto Lavagna and his Cabinet chief Alberto Fernandez.

On Monday, the IMF sent Lavagna a document expressing its willingness to honor the three-year agreement with Argentina, which allows the South American country to defer some $21.6 billion in payments. But the letter included additional requirements and insisted that Argentina offer a better deal to private holders of some $88 billion of sovereign debt, which has been in default since the end of 2001. Buenos Aires has said it will pay only 25 cents on the dollar of that debt. That offer has been rejected by creditors.

According to versions published Tuesday by the local press, Argentina had prepared a contingency plan for entering into default with the international lender. The plan reportedly envisioned freezing the country's Central Bank accounts in Washington.

If Argentina did not make Tuesday's payment, the IMF would have been expected to order immediate cancellation of already approved loan disbursements and refuse to make new loans to the country.