Global Investing

from MacroScope:

Vultures swoop on Argentina

Holdouts against a settlement of Argentina’s defaulted debt are opening a new front in their campaign for a juicy payout more than a decade after the biggest sovereign default on record.

Lobbyists for some of the investors who hold about $6 billion in Argentine debt are in London to persuade Britain to follow the lead of the United States, which last September decided to vote against new Inter American Development Bank and World Bank loans for Buenos Aires.

Washington believes Argentina, a member of the Group of 20, is not meeting its international obligations on a number of fronts. Apart from the dispute with private bond holders, Argentina has yet to agree with the Paris Club of official creditors on a rescheduling of about $9 billion of debt. It has refused to let the International Monetary Fund conduct a routine health check of the economy. And it has failed to comply with the judgments of a World Bank arbitration panel.

In short, Argentina is not playing by the rules of the international game, says Rob Shapiro, a former U.S. under secretary of commerce, who is now co-chair of the Argentina Task Force America.

According to its website,  the group’s aim is to “vigorously pursue” a “just and fair” reconciliation of the Argentine government’s default in December 2001 on some $95 billion of debt.

But what does Argentina’s presidential couple think?

Markets are waiting for Argentine President Cristina Fernandez and her husband and predecessor ex-President Nestor Kirchner to show they support plans for Argentina to return to international credit markets after a long absence.  Fernandez and Kirchner are known as the presidential couple and no major Argentine policy move can go forward without their stamp of approval.  Decision making is seen as almost entirely concentrated in them.

So, no matter how much new Economy Minister Amado Boudou talks about his plans to resolve Argentina’s different debt problems and issue a new global bond, eyes are on the presidential couple.  Boudou says he wants to move forward on various fronts. First, he wants to reopen a massive 2005 restructuring to attract holders of some $20 billion in defaulted sovereigns to neutralize their lawsuits — but this means sending a bill to Congress, something the president would probably announce. Secondly, he wants to normalize rlations with the International Monetary Fund, which were derailed a few years ago.  Lastly, he wants to restructure some $6.7 in defaulted debt to wealthy creditor nations in the Paris Club. 

Argentine bonds have rallied strongly on expectations that Boudou will make progress on these fronts, but the rally could fizzle without prompt concrete steps.