Argentina should pay its debt with the Paris Club group of creditor nations if it wants to continue receiving foreign investment, said Paolo Martelli, director for Latin America of the World Bank’s International Finance Corp, reports Buenos Aires daily La Nación.
It’s unclear whether other nations will follow the US government’s recent decision to vote against loans to Argentina in the World Bank and Inter-American Development Bank until the country pays defaulted debt, Martelli said, according to La Nación.
“It would be encouraging for the Argentine government to resolve its pending debts with the Paris Club and corporations which won court actions overseas, so that large medium term investments can feel attracted and not undergo difficulties such as those interposed by the US in credits to Argentina, and which could add other G20 members”, said Martelli who as head of the IFC deals with World Bank loans for the private sector.
IFC already finances over a billion dollars in Argentina in energy, agriculture and finance sectors, particularly in the category of small and medium companies. The financial sector benefited with 190 million dollars in loans; energy, 490 million; food and beverage, 159.9 million, transport and 77 million dollars, among others.
Martelli also had praise for the Argentine private sector. “The (2001) Argentine crisis was a very hard test for the private sector, from which emerged some first line actors that have shown great determination in adapting, together with new players”.
However Martelli admits a big question mark when it comes to what effects would it have on the IFC the recent US government decision to vote against new credits for Argentina in the World Bank, until the Argentine government complies and compensates US corporations following decisions from the CIADI (International Centre for the Settlement of Investment Disputes).
Martelli indicated that besides discussions with governments and multilateral organizations there are “a question of trust” which Argentina must achieve from its creditors. “There is a delicate aspect to this situation about which we still do not have complete picture, and that is since Argentina belongs to G20, it is yet uncertain if the US decision is an isolated decision or belongs to several countries”.
“There is a delicate balance for the US administration: on one side ignoring Argentina while it does not comply with payments and on the other the uncomfortable situation generated by the government of President Cristina Fernandez which is the only member of G20 that for over four years has not opened its accounts to IMF annual review”.
“Any action, initiative to reinforce Argentina’s creditability will surely have a positive impact for the country”.
According to the Financial Times quoting Neil Shearing, chief emerging markets economist at Capital Economics, the World Bank has around 1.5bn dollars under consideration for Argentina, and already has programs worth around 6bn.
The US has a 30% voting share at the World Bank and 17% at the IADB which means its action carry weight. On September 14, the US voted against a 230 million dollars loan to Argentina.