MercoPress. South Atlantic News Agency

Argentina plans to reach agreement with “holdouts” and Paris Club

The restructuring plan (and the holdouts) dates back to 2005

Argentina plans to reach an agreement with holders of the country's defaulted debt in an effort to return to international lending markets, according to a draft of the 2010 budget submitted to Congress this week.

The government will “continue advancing in the process of regularizing the pending debt payments from the restructuring, for those who did not participate in the 2005 swap, those maintained with bilateral credit bodies and those with private creditors,” according to the budget posted on the Congressional website Thursday.

The Argentine government hopes that progress on dealing with the defaulted debts “will permanently improve financing conditions and the current rate and yield structure to add dynamism to public and private credit.”

“This will allow a return to local and international markets for public finance,” the budget reads.

About 100 billion US dollars of Argentine sovereign debt was caught up in Argentina's world-record setting 2001 sovereign debt default. Investors holding about 30 billion USD of bonds didn't participate in a 2005 exchange, which offered about 33 cents on the dollar. Argentina has been unable to sell bonds in international markets since the default due to the dispute with the holdouts.

In October, Argentina's government said it would tap central bank reserves to repay the 6.7 billion USD in defaulted debts to official Paris Club lenders, a move that could free up badly needed project-and-trade financing.

However, the plan was put on hold in late 2008 as the effects of the international financial crisis rippled through the local economy. Nevertheless reaching an agreement with the Paris Club should be more straightforward than with the holdouts, once the IMF auditing controversy belongs to the past.