Argentina Rules Out Sovereign Default

Despite fears among investors that lack of access to international markets will force Argentina to default, the sovereign says that is will stay current on its debt. “We won’t see that in any way,” Argentine finance secretary Hernan Lorenzino tells LatinFinance. “I absolutely rule out [default] in any way,” he adds. The sovereign’s main 2009 payments are in August on the Boden 12 and December on the GDP warrants, and Lorenzino says they will be met. Asked about holdouts from the 2005 exchange, Lorenzino says that a deal circulated last year –which he values at around 40% recovery – is no longer attractive, following significant movement in the market. “Today, exactly the same proposal has a value of around half,” says the secretary. “We think it’s going to be difficult to reach a resolution, but nonetheless we are looking at alternatives that are necessary, with the market, to reach a solution,” he adds. And unlike some of his predecessors, the official remains open to a dialogue with creditors. “We are in discussions with all parties . . . There’s no rush, but there’s a will to continue advancing,” says Lorenzino. Investors appear sanguine on a deal, especially given Lorenzino’s history at the Province of Buenos Aires, which he helped steer through what was seen as a more market friendly restructure. The province was rewarded with market access, and Lorenzino notes that it is important for his country to tap foreign financing. “Argentina has sufficient resources to cover its obligations in the near future, but it’s always good for countries to have access to international markets,” says the secretary. “Today the yields asked from Argentina are not in line with the economic fundamentals, nor are they reasonable,” he adds. Analysts note that financing conditions become more complicated in 2010. And market watchers will remember that former Argentine economy minister Domingo Cavallo ruled out default in late 2001, weeks before a moratorium on $100bn in debt. Continued