Summit of bondholders in Paris Club over Argentina

Summit of bondholders in Paris Club over Argentina

Ambito Financiero

Wednesday, September 12, 2012

Yesterday in the French capital there was a conclave among bankers, bondholders and representatives of the Paris Club, which was also attended by officials of the IMF and the World Bank, where they analyzed debt restructurings. The Argentina case was not absent and according to one of the organizers of the meeting, the Institute of International Finance (IIF), “the creditors exchanged views about the status of the restructuring of Argentina’s foreign debt and in particular the treatment of the ‘holdouts’ (bondholders that didn’t enter the debt swap). The sense of the discussion was that, after focusing on restructuring its debt, Argentina has not been able to return to accessing the international capital markets,” according to an official statement from the IIF.

Today, at the headquarters of the French Ministry of Economy and Finance, they will resume looking at the renegotiation between the Paris Club and Argentina. For that they convened not only academics like Anna Gelpern and Mitu Gulati, from American and Duke universities respectively, but also the inevitable Nicola Stock, head of Task Force Argentina, and Hans Humes, of Greylock Capital, both from the side of the bondholders.

In yesterday’s meeting there was also a discussion “about the methodology of setting a value for the contingent balances that defined the importance of a correct evaluation of these amounts because they could have a strong impact on the sustainability of public debt, above all during the financial crisis.” The international creditors also discussed the more recent restructurings of the Paris Club, among them Guinea and St. Kitts and Nevis, and with emphasis on the issue of comparing the treatment of Ivory Coast.

A presentation from the IMF explained the current process of modernization and clarification of the framework of fiscal policy and the analysis of the sustainability of public debt by the organization. “The recent global crisis has put into relief the need for greater attention to the sustainability of public debt of countries with access to the market.”

The creditors also exchanged views about the forms and methods of strengthening the framework for preventing sovereign debt crises and resolving them, in the context of applying the “principles for stable capital flows” and the fair restructuring of debt. The participants stressed the importance of a close dialogue between the private and public sector, especially in times of economic difficulties. They emphasized the usefulness of the principles for the stability of capital developed under the aegis of the main borrowers among emerging markets and the private creditors: transparency, dialogue, negotiating in good faith and equal treatment of creditors.

According to what Cristina de Kirchner put forth to Minister Hernan Lorenzino, the goal was to get an agreement with the Paris Club before the end of the year. The negotiation remains frozen over the period of payment and whether the IMF will participate in the agreement. The debt is more than US$9 billion, including interest.

The Paris Club will lay claim to Argentina's debt today

La Nacion

Wednesday, September 12, 2012
By Martin Kanenguiser

The Paris Club will analyze the status of Argentina’s debt today, which has been unpaid since the end of 2001 and which comes to around US$9 billion.

Diplomatic sources told LA NACION yesterday that the creditor countries are waiting “anxiously and with concern” over the possibility that the government will present a payment plan, after having sent a letter last April in which they called for some kind of formal response from Argentina after more than ten years of default.

The last time that the governments discussed this issue was in June, before the summer in the northern hemisphere, but “there was no proposal from Argentina since then,” said the source, with a tone of resignation.

Informally, the last contact was when the government sounded out with some embassies if there was a chance of financing YPF after the exit of Repsol in exchange for normalizing this balance, but they got total refusals.

The context for the meeting today is not the best: in addition to the extensive annoyance that grips the creditors, yesterday came added criticism in a meeting that the Club held with the Institute of International Finance (IIF), the think tank for the banks from around the world. The IIF holds a very critical position against Argentina and has so since 2002, especially since the negotiation of the first swap to exit the default (2005), because they wanted a more friendly offer to the bondholders then what Kirchnerism launched.

In the meeting, in which bankers, analysts and officials of other governments attended, “the attendees exchanges opinions about the restructuring of Argentina’s debt,” said the IIF in a statement. “The direction of the discussion was that, after focusing on its restructuring, Argentina could resume access to the capital markets,” the Club said in a statement. Curiously, it took up Argentina as one of three case studies, with the Ivory Coast and St. Kitts and Nevis (a small island nation in the Antilles).

Speaking about Argentina were the representatives of the French Treasury (which acts as Club secretary), of the bondholders in Italy, Nicola Stock, and from the U.S., Hans Humes and two American academics, Anna Gelpern and Mitty Gulati. Also present were Club president Ramón Fernández and IIF executive director Charles Dallara. "The debate was not amiable,” the source said, adding that the comments were used as a basis for the discussion among the governments scheduled for today in the French capital.

At the end of 2008, President Cristina Kirchner announced the payment of the debt with the Paris Club with Central Bank reserves through a decree, but it was never applied.

The IMF’s bad mood

An executive with good connections with the government believes that the resolution of this issue “is quite far off” from the agenda of the economic team. “They’re concerned with getting dollars, not spending them,” he said.

However, it isn’t ruled out that some signal could be sent to address the annoyance that also prevails within the board of the International Monetary Fund (IMF), before next Monday when it will debate the status of Argentina’s public statistics. After granting six months last February to improve the transparency of the statistics on inflation and GDP, the board could opt on Monday for a simple statements to take into account that the government has not moved ahead on dispelling doubts that have existed since 2007 on the figures of the INDEC, or begin a process of sanctions.

Article 8 establishes that a motion of “censure” could be applied by other countries and then a process could be activated in which the country would subsequently lose the right to resources from the IMF (in 2010 it received US$2.5 billion from the organization, which helped cover over the fiscal deficit) and then its right to vote.

Without significant progress in the credibility of its statistics, the government opted for doubling up on the tug of war and designated Sergio Chodos, who until now has been a director at the BCRA, as its representative to the IMF.

Chodos, who will go from collecting a salary of 90,000 pesos to only 20,000, will replace Alfredo Mac Laughlin, an ex-banker that, after the death of Nestor Kirchner, lost contact with Buenos Aires. In the government, they are anticipating a “more strong and coherent strategy” equal to that of the World Bank, in which Guido Forcieri, another official linked to Vice President Amado Boudou, will replace Alberto Camarassa, in carrying out the difficult task of getting a plan of credits for US$3 billion passed in November with the opposition of the United States.

“Officials getting too comfortable in Washington will have to be avoided,” said an official source