Argentina renegotiates foreign debt

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Margarita Island, Nueva Esparta State, Venezuela. As the world witnesses financial turmoil, the Argentinean government pushes for the re-scheduling and swapping of its foreign debt of US$150,000 million dollars. Last night, President Cristina Fernandez formally initiated negotiations with Barclay's, Citibank and Deutsche Bank for a discount on  66% of the total debt. According to Buenos Aires Herald "it is expected that private investors will provide funds to roll over deadlines, and that the old bonds will be exchanged for  only one new type, the Discount 2033."

The new negotiations attempt to revisit the terms of agreements reached in 2005 for sovereign-debt restructuring. According to the Economist, "Ms Fernández’s about-face represents a belated recognition of Argentina’s deteriorating financial situation. In 2007, when the presidency was held by her husband, Néstor Kirchner, the country began doctoring its official inflation statistics to keep them in single digits, while the true rate rose to around 25%. This enabled the government to save some $500m in payments on its bonds linked to the consumer price index, but destroyed its credibility."

As the economy of Argentina deteriorated during the first year in office and the Venezuelan purchases of bonds turned insufficient, President Cristina Fernandez decided to lure the financial markets with the new negotiations to continue borrowing money.

Sources:Telesur, Buenos Aires Herald, The Economist