MercoPress. South Atlantic News Agency

Argentina and Club of Paris creditors agree to discussions with no IMF auditing

President Cristina Fernandez made the announcement on national television

The Paris Club of creditor nations accepted Argentina’s request to hold talks on restructuring its estimated 6.7 billion US dollar of debt without the oversight of the International Monetary Fund, announced on Monday President Cristina Fernandez de Kirchner.

Cristina Fernandez said in a nationwide broadcast from Buenos Aires that she hopes to have the defaulted debt renegotiated by 2011. Argentina won’t have to pay fees as the talks won’t involve banks, companies or advisors, the president said.

The Paris Club “has accepted Argentina’s position to negotiate its debt without IMF intervention,” Fernandez said. “The negotiating should be realistic, which means it should involve a payment plan that will allow us to sustain the country’s economic activity and grow with social inclusion.”

“This comes to show how brief-a-time destruction takes and how long reconstruction”, said the Argentine president adding that the debt originated in the nineties when the country followed IMF recipes “and when we most suffered”.

Argentina owes the Paris Club, an informal association of creditors that includes the US, Germany, UK, France, Japan among a total of 19 developed countries, about 6.7 billion USD in defaulted debt.

According to some Buenos Aires financial press sources negotiations with the Club of Paris had been back on tracks before the recent South Korea G-20 summit and Finance minister Amado Boudou apparently spent a day in Paris, in a non declared trip, where he received the final OK from the creditors.

Negotiations with the Club of Paris were not only being demanded by the 19 country members’ authorities, plus the IMF, World Bank and other multilateral organizations but also Argentina’s corporate and business groups needy of foreign long term credit at flexible market rates.

Last June, the government of Argentina restructured 12.2 billion in sovereign bonds that were held out from a 2005 exchange. The country defaulted on 95 billion in bonds in late 2001.

Fernandez on September 2008 had announced plans to tap central bank reserves to pay down Argentina’s debt to the creditor group. The government had to shelve the plan once the global financial crisis took hold following the bankruptcy of Lehman Brothers Holdings Inc. less than two weeks later.

Argentina’s credit rating was raised by Standard & Poor’s in September, saying the country’s “strong” economic expansion is helping it make debt payments.

S&P raised Argentina’s foreign and local debt ratings one level to B, in line with Bolivia and Honduras and five steps below investment grade. The increase matches a move made by Fitch Ratings in July.

An agreement with the Paris Club is not “a rating change trigger, but it’s definitely a positive event in the sense that Argentina will continue to normalize its relationship with the international community,” said Sebastian Briozzo, a Latin America director at S&P, in a telephone interview in Buenos Aires, before today’s announcement.

“If that issue is solved, it will be very positive in terms of allowing Argentina to receive more funds from foreign direct investment,” Briozzo said.