Argentina’s government yesterday ruled out further piecemeal debt talks with a small group of US hedge funds and said the country needed to strike a deal with all bondholders which have rejected past restructuring agreements as a single group.
Latin America’s No. 3 economy fell into default again last month after failing to reach an agreement with a group of holdout funds led by NML Capital Ltd and Aurelius Capital Management, which are suing for full payment on their bonds.
Other funds which have also rejected bond swaps that followed the South American country’s record default in 2002 lurk on the sidelines and could launch similar lawsuits.
“We have to negotiate with everyone,” Economy Minister Axel Kicillof told a group of congressional committees yesterday.
A deal is now not likely before next year’s October presidential election, in which President Cristina Fernandez cannot run.
Analysts say the dearth of dollars flowing into the economy will stretch already-sapped foreign reserves and intensify pressure on a peso that is falling through one record low after another.
The local currency shed 1.5 per cent on the black market yesterday to plumb an all-time low of 14.400 as central bank reserves fell to $28.5 billion. Argentina’s Congress began debating on Wednesday a draft Bill designed to sidestep a US court ruling banning Argentina from servicing performing debt until it pays the litigating funds $1.3 billion plus interest.
The main aim of the draft Bill is to show that Argentina can pay its debt
“The main aim of the draft Bill is to show that Argentina can pay its debt and wants to pay its debt,” senior government official Carlos Zannini told the same hearing. Kicillof’s comments poured cold water on already dim hopes the government might resume talks with NML and Aurelius in early 2015 following the expiration of a legal clause preventing Argentina from paying holdout investors on better terms than those obtained by investors which accepted restructuring agreements in 2005 and 2010.
Investor optimism suffered a blow last week when President Cristina Fernandez announced plans to make debt payments locally and to push bondholders to bring their debt under Argentine law. Zannini said the long-term plan was to bring all Argentina’s sovereign debt under Argentine law.
Erratic policymaking, which saw interest rates cut last week and then raised this week, highlighted tensions between the pro-expansion Kicillof and the central bank presiding over one of the world’s highest inflation rates.