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Argentina, Paris Club to Begin Debt Talks Without IMF

The Paris Club group of creditor nations accepted Argentina’s request to start talks on restructuring about $6.7 billion in debt without the oversight of the International Monetary Fund, President Cristina Fernandez de Kirchner said.

Fernandez, who first announced plans to pay the Paris Club in 2008, said in a nationwide broadcast from Buenos Aires last night that she hopes to have the defaulted debt renegotiated by 2011. A resolution of the outstanding debt would help generate investment in the country, Fernandez said, adding that Argentina won’t have to pay fees since the talks won’t involve banks, companies or advisers.

The Paris Club “has accepted Argentina’s position to negotiate its debt without IMF intervention,” Fernandez said. “The negotiating should be realistic, which means it should involve a payment plan that will allow us to sustain the country’s economic activity and grow with social inclusion.”

South America’s second-biggest economy owes the Paris Club, an informal association of creditors that includes the U.S., Germany and Japan, about $6.7 billion in defaulted debt. In June, Argentina restructured $12.2 billion in bonds that were held out from a 2005 exchange. The country defaulted on $95 billion in bonds in late 2001.


Fernandez said she received an e-mail from the Paris Club earlier this month accepting Argentina’s request to leave the IMF out of the talks. The e-mail was followed by an official letter confirming the acceptance, she said.

Bloomberg messages seeking comment from France’s Finance Ministry, which houses the Paris Club, weren’t immediately answered. Andreas Adriano, an IMF spokesman in Washington, said the fund doesn’t comment on the Paris Club’s affairs.

Fernandez, on Sept. 2, 2008, announced plans to tap central bank reserves to pay down Argentina’s debt to the creditor group. The government had to shelve the plan once the global financial crisis took hold following the bankruptcy of Lehman Brothers Holdings Inc. less than two weeks later.

Standard & Poor’s raised Argentina’s credit rating in September, saying the country’s “strong” economic expansion is helping it make debt payments. The economy will expand 9 percent this year, the most since 2005, according to the central bank’s forecast, after 0.9 percent growth last year.

Debt Ratings

S&P raised Argentina’s foreign and local debt ratings one level to B, in line with Bolivia and Honduras and five steps below investment grade. The increase matched a move made by Fitch Ratings in July.

An agreement with the Paris Club is not “a rating change trigger, but it’s definitely a positive event in the sense that Argentina will continue to normalize its relationship with the international community,” said Sebastian Briozzo, a Latin America director at S&P, in a telephone interview in Buenos Aires, before yesterday’s announcement.

Foreign direct investment in Argentina is among the lowest in South America’s major economies, totaling $2.2 billion in the first half of 2010 compared with $17.1 billion in Brazil, $8 billion in Chile, $4.1 billion in Colombia and $3.4 billion in Peru, according to the Santiago-based United Nations Economic Commission for Latin America.

If the Paris Club situation can be resolved, “it will be very positive in terms of allowing Argentina to receive more funds from foreign direct investment,” Briozzo said.

The Paris Club met for the first time in May 1956 in the French capital, after Argentina “voiced the need to meet its sovereign creditors to prevent a default,” according to the organization’s website.

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