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Economy Minister Axel Kicillof, center, speaks before the Senate beside Senator Anibal Fernandez, right, and the government's Legal and Technical Secretary Carlos Zanini inside the National Congress in Buenos Aires, Argentina, Aug. 27, 2014. (Natacha Pisarenko/AP)
Economy Minister Axel Kicillof, center, speaks before the Senate beside Senator Anibal Fernandez, right, and the government's Legal and Technical Secretary Carlos Zanini inside the National Congress in Buenos Aires, Argentina, Aug. 27, 2014. (Natacha Pisarenko/AP)

Argentina wants deal with all bondholders together Add to ...

Argentina’s government on Wednesday ruled out further piecemeal debt talks with a small group of U.S. hedge funds and said the country needed to strike a deal with all bondholders that 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 that 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 on Wednesday.

A deal is now not seen 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 on Wednesday to plumb an all-time low of $14.400 (U.S.) as central bank reserves fell to $28.5-billion.

Argentina’s Congress began debating on Wednesday a draft bill designed to sidestep a U.S. 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 and wants to pay its debt,” senior government official Carlos Zannini told the same hearing.

Mr. 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 who accepted restructuring agreements in 2005 and 2010.

Investor optimism for a deal suffered a hammer blow last week when Ms. Fernandez announced plans to make debt payments locally and to push bondholders to bring their debt under Argentine law.

Mr. Zannini said the long-term plan was to bring all Argentina’s sovereign debt under Argentine law.

Erratic policy-making, which saw interest rates cut last week and then raised this week, has highlighted tensions between the pro-expansion Mr. Kicillof and the central bank presiding over one of the world’s highest inflation rates.

“It is unclear that they are ready to make the adjustments needed to meaningfully control [foreign exchange] pressures,” said Daniel Kerner, director of Latin America for the Eurasia Group.

 

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