Argentina, Latin America's third largest economy is on track to grow more than 8% for the fifth straight year, rivaling Asian expansion rates. But there are some pending issues on the debt front.
The country restructured about 100 billion US dollars in defaulted sovereign debt in 2005, but it still owes the Paris Club of creditor nations 7 billion US dollars. Talks are stalled because Argentina refuses to seek an IMF program as required by the Paris Club. Nor does Buenos Aires want to tap its hefty foreign reserves to repay the debt. The Kirchner administration paid off Argentina's IMF debt last year and elected president Cristina Fernández said a new accord would be politically impossible, although she has said repeatedly that the government wants to repay the Paris Club. Another complication for Buenos Aires lies in the "holdout" creditors who rejected the 2005 sovereign restructuring. They demand that the IMF and Paris Club members play tough with Argentina to pressure for repayment of the un-tendered bonds. Some say Cristina Fernández should reopen the debt swap to holdouts so Argentina can lower its borrowing costs by issuing paper under international legislation. It cannot do that now for fear of asset seizures by suing creditors. But the topic seems taboo in Argentina and the elected president has said nothing. Those analysts who predicted President Kirchner would take some politically difficult steps to ease his wife's transition to power might be rethinking that logic. This month he pressed supermarkets to lower food prices, forced banks to lower interest rates, and ordered private pension funds to repatriate some of their investments abroad. "Following the recent intensification of the government's ad hoc measures... the markets would likely need to see concrete positive signals emanating from the new administration's policy decisions before growing much optimism," Barclays Capital said in a report last week.