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Argentina returns to credit markets after 15 years

19 april, 14:23
0
People walk past the facade of the Finance Ministry in Buenos Aires, Argentina. ©AFP
People walk past the facade of the Finance Ministry in Buenos Aires, Argentina. ©AFP

Argentina made its return to international financial markets Monday, receiving offers from investors for its sovereign bonds ahead of its first debt sale in 15 years, a government source is quoted by AFP as saying.

Latin America's third-biggest economy is seeking to end 15 years of financial isolation by borrowing cash on world credit markets for the first time since a 2001 default.

"We have started to receive offers. We will know the total amount" on Tuesday, a source in the finance ministry, who asked not to be named, told AFP.

The government was hearing bids by investors ahead of the formal bond issuing process that was due to take place on Tuesday, organized by international banks.

Argentine newspaper La Nacion cited sources involved in organizing the debt auction that the government had received offers worth $67 billion -- five times the amount of bonds available.

The country is looking to boost its struggling economy and settle a 15-year lawsuit by US investment funds which its ex-president Cristina Kirchner branded as "vultures."

Now that a US court has cleared the way for Argentina to start borrowing again, the government planned to issue a reported $15 billion in medium- and long-term bonds.

"Argentina is back," said Finance Minister Alfonso Prat-Gay in Washington ahead of the sale. 

'Major step forward' 

Argentina's new conservative president Mauricio Macri has claimed the return to the international financial fold as a victory.

His opponents said poor families would bear the cost of his borrowing since public spending cuts would be imposed to pay off the debts eventually.

Macri has been scrapping Kirchner's protectionist policies and opening up Argentina's diplomatic and financial ties.

He has removed currency controls and raised utility prices, triggering angry protests from Argentines who say their spending power is declining.

The bond sale "is a major step forward," said Agustin Carstens, head of the IMF world lender's Monetary and Financial Committee, on Saturday.

"It is very good to have a country as important as Argentina putting the house in order."

He warned however that Argentines would have to endure tough economic cutbacks to stabilize the economy and public finances.

"Needless to say in the short term some measures may be difficult to digest," Carstens said in Washington.

The IMF forecasts that Argentina's economy will contract by one percent this year and grow 2.8 percent in 2017.

Prat-Gay has given a stronger forecast of around zero growth this year and growth of up to four percent next year. 

'High credit risk'

South American countries generally borrow at 3 to 4 percent interest, but analysts forecast Argentina would have to offer a higher rate of up to 9 percent in its new bond issue.

After the 2001 crisis, some Argentines object to taking on new debt -- not least Kirchner and her allies.

"Once again history is repeating itself and catching the Argentines out. Debt, devaluation, layoffs, political persecution, price rises," Kirchner said in a speech last week.

"These are just a few of the calamities that the new government has caused in barely four months."

Macri on Saturday announced a series of social welfare measures that he said would help the poor cope with the cuts.

The finance ministry said it has enlisted Deutsche Bank, HSBC, JP Morgan, Santander, BBVA, Citigroup and UBS to organize the bond sale.

It has included a clause to prevent a small number of shareholders from blocking the restructuring of the debt.

That is a measure to avoid a repeat of Argentina's fight with the "holdouts," international investment funds that sued it in the US courts for full repayment after its 2001 default.

Credit rater Moody's raised Argentina's sovereign rating on Friday ahead of the bond sale.

It still ranks as a speculative investment with a "high credit risk," but less high-risk than before.

By Alexandre PEYRILLE


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