November 25, 2014
Gov’t denies Goldman Sachs loan in the works
Economy Ministry refutes having foreign currency debt issuance planned in short term
The Economy Ministry yesterday refuted in a release that “any foreign currency debt issuance has been planned in the short term,” confirming nonetheless that the deal to compensate Repsol and the setting up of negotiations with the Paris Club had led to “credit offers from diverse financial entities at rates and lengths aligned with those offered to other countries in the region.”
“Any operations for credit outside the norm ... will be duly informed by this ministry,” the brief release concludes.
Página/12 published a report citing an official source that the country is closing in on a deal to receive around US$1 billion in loans from investment bank Goldman Sachs and is in talks with other international banks about similar deals.
The paper, which has close ties with the government of President Cristina Fernández de Kirchner, said the two-year loan would be announced in the next few days and carry an annual interest rate of 6.5 percent.
It would be the first time in more than a decade the country has received a substantial loan from international creditors and comes as the government seeks cash to avoid a further devaluation of the peso.
The Economy Ministry did not provide immediate comment on the report when requested by Reuters.
The government wants the new funds to boost its depleted foreign exchange reserves, the paper said, citing an unnamed government source. The Central Bank’s reserves will see a further improvement in April with cash from the export of the country’s grain harvest starting to flow in with pace.
Dollars have been scarce in Argentina due to capital flight, weak exports, and low competitiveness because of high inflation. The country has been shut out of international capital markets since a massive 2002 default, a situation the government has proactively sought to address over the last six months, for instance, with the agreement to compensate Spanish oil firm Repsol for the expropriation of YPF in 2012.
The government will be hoping that securing the Goldman Sachs loan will demonstrate that its strategy of thawing relations with international creditors is starting to take effect in practical terms, said the paper.
Argentina has also offered to repay a debt of around US$9.5 billion to the Paris Club of creditor nations stemming from the 2002 default.
The club had accepted Argentina’s initial proposal to pay back the funds without recourse to the International Monetary Fund and to request credit lines from the countries it owed money to, Página/12 said in a separate report on Sunday.
Talks were continuing over the repayment terms, it added, with the Paris Club having invited the government on March 14 to formally negotiate. Talks will be starting in the week of May 26.
Parallel to negotiations in Paris, the country has firmly upheld its resistance to holdout hedge funds seeking full repayment on defaulted bonds from Argentina’s 2001-02 financial crisis, with litigation in the United States still far from resolved. Throughout proceedings, the Fernández de Kirchner administration has emphasized its willingness to pay the funds she refers to as “vultures,” but on the same terms as the 92 percent of bondholders who accepted restructuring offers in 2005 and 2010.
Data realism is conveniently saving Argentina US$3.5 billion, as last year’s growth was officially reported as three percent on last Thursday, against expectations of a suspiciously high five percent. That also means Argentina avoids a payout on GDP-linked bonds. But the move toward more a credible economic policy has broader, lasting benefits too, like helping state-controlled oil company YPF borrow money abroad.
The new data complemented the debut of credible inflation numbers from the INDEC statistics bureau in February.
Herald with Reuters