MercoPress. South Atlantic News Agency

Argentina admits reopening debt restructuring

Argentine Economy Minister Roberto Lavagna admitted for the first time that those sovereign bond holders left out of the recent exchange will be considered but on Argentina's “time and terms”.

Mr. Lavagna made the announcement during his address Monday to the 46th Inter-American Development Bank annual General Assembly in Okinawa, Japan.

Although the defaulted sovereign bonds exchange operation was considered a "success" by Argentine authorities because 76% of creditors adhered, an estimated 20 billion out of a total 82 billion US dollars rejected the offer which basically meant exchanging one US dollar face value for 33 US cents.

However Mr. Lavagna pointed out that whatever is done in the future will be according to "rules established in the prospect" of the exchange operation. This means conditions can't be improved and if they are, they must be extensive to bond holders who accepted the original conditions. Mr. Lavagna's address followed an IMF call on "hold outs" (who didn't take the offer) an estimated 24%, to adopt a "realistic strategy".

Earlier in the day Japanese Finance Minister Sadakazu Tanigaki criticized the Argentine bond exchange appealing to words such as "deplorable" and "bad faith". "I consider really deplorable that Argentina failed in negotiating in good faith with creditors and proceeded to act unilaterally without giving creditors another option", stressed Mr. Tanigake in not too polite words.

However Mr. Lavagna defended the Argentine debt restructuring process arguing that the country didn't have many options and was forced into a plan given the lack of fresh funds from the IMF and the severity of the economic and social crisis in Argentina.

"Many criticisms and misunderstandings come from the lack of comprehension of these differences which have been a constant source of friction and frustration", insisted Mr. Lavagna who also insinuated that part of the blame rests on multilateral organizations that strongly recommend implementing restructuring programs to satisfy creditors instead of having as main priority ensuring sustainable growth. "This is the logic that keeps an economy on artificial respiration?as was the case with Argentina, which was rapidly loosing steam while experiencing a worsening of social exclusion and increasing debt". "This inevitably leads to a crisis", highlighted Mr. Lavagna.

The controversy with Japan is over 2,6 billion US dollars defaulted bonds, which according to Mr. Lavagna ended in the hands of small investors sold by "unscrupulous" Japanese bankers who didn't warn clients (mostly pensioners) about their exposure and vulnerability, when "Argentine debt issue prospects clearly indicate that these bonds are not for small investors".

A similar situation in Italy ended with hefty fines on banks involved in Argentine bond operations.