Argentina Seen Comfortable for Funds Until 2009

Argentina should be able to muddle through and cover its funding commitments for this year using Chavez and domestic markets. But crunch time is coming in 2009, according to a LatinFinance panel on Argentina’s economic and political future held Thursday in Miami. “The financial needs of the government are going to be higher next year and that will cause the government to tap the international markets,” says Martin Krause, professor of economics at ESEADE and the University of Buenos Aires. “In order to be able to go to the markets next year, they need to start solving the problems now, which is basically the Paris Club and the holdouts,” he adds. Claudio Loser, senior fellow at the Inter-American Dialogue, called the Argentina situation “totally unsustainable.” Other panelists said that President Cristina Kirchner’s initial hints that she may interested in resolving the holdout situation have waned, leaving investors less hopeful of an agreement any time soon. ATFA, the bondholder lobby group, plans to step up pressure through the US government, but it is unclear how fruitful this will be. In the past, the sovereign has ignored similar pressure, and bondholders lack a unified negotiating platform. Overall, it looks like the sovereign is free to coast on elevated soft commodity prices, at least for the short term. “Luck is still on the side of Argentina for now and for the foreseeable future,” says Pablo Morra, economist at Goldman Sachs.