Mixed signals on Argentina debt restructure

if you've been following my posts on the argentina bond swap (here, here and here), there's more news today... the buenos aires herald says:

Just one day ahead of the G7 summit, and two days before the IMF annual Spring meeting, pressure is mounting on the Argentine government to develop a "realistic" negotiation strategy with those bondholders that did not enter the recent debt restructuring swap, which closed on February 25.

Meanwhile, US Treasury Undersecretary John Taylor said on Sunday that major industrialized countries so far accept Argentina's debt-restructuring tactics, effectively contradicting comments made earlier by Japan's finance minister.

At this point of time, (Argentina's) policy has been good one to take, and the 76% of participation rate is characteristic of that arrangement based on good, transparent discussions between the debtor and creditors.

Earlier, Japan's Finance Minister Sadakazu Tanigaki said

Argentina's strategies lack sincerity, and risk setting a "bad example" for other debtor countries. ... Tanigaki told a press briefing that he didn't think well of the high acceptance rate because Argentina has achieved it by "basically leaving investors no other choices" than to take the offer.

IMF Managing Director Rodrigo de Rato was less ambiguous:

Argentina needs to address creditors who chose not to participate in the nation's $104 billion debt swap earlier this year before the International Monetary Fund can resume lending, [he] said.

Given past pronouncements, Argentina's response was predictable:

Argentina's foreign minister, Rafael Bielsa, told Radio America in Buenos Aires yesterday that President Nestor Kirchner won't reopen the debt swap, which pays creditors 30 cents on each dollar they were owed. At stake is an IMF loan arrangement worth $13.3 billion.

But Kirchner isn't just saying no. It sounds more like "Hell, no!"

``The IMF always seems to find a new problem to make our journey more difficult,'' Kirchner said. ``The IMF, as it works now, doesn't have a destiny and doesn't have a future.'' ... Kirchner said the country's economy has grown 20 percent over the past two years.

This is the part I REALLY like.

``There is life after the IMF,'' [Kirchner] said, adding Argentina has repaid the IMF $11.5 billion since 2003. ``We've lowered our debt and our exposure.''

But de Rato doesn't sound like he will be easily deterred.

``The Argentinean authorities have to put forward a realistic approach, a realistic strategy regarding the unrestructured debt,'' de Rato said. ``Whatever solution there is to debt'' will have to take into consideration the nation's debt sustainability as well as the IMF's lending into arrears policy.

Kind of fascinating, isn't it...? Stay tuned...

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