Argentina officials will today meet the US mediator - in its battle with ‘holdout’ debt investors suing the country - for last-minute talks to avert its second default this century.
Mediator Daniel Pollack said in a statement yesterday he had received a telephone call from the Argentine government advising him a delegation of technical, financial and legal representatives will meet him at 11am EDT (1500GMT) today in his office.
“I again urged direct, face-to-face conversations with the bondholders, but that will not happen today,” Pollack said, referring to the holdout creditors.
Argentine dollar-denominated bonds fell more than 3% in over-the-counter trading before recovering some losses as the clock wound down toward tomorrow’s deadline for Latin America’s No. 3 economy to either pay the New York hedge funds in full or cut a deal to stave off a default.
Argentina’s isolation from global capital markets means an eventual default would be highly unlikely to send shockwaves through emerging markets worldwide, but it will hurt a domestic economy already in recession and battling soaring inflation.
Negotiations have made scant progress in the past three weeks.
If the deadlock persists, US district judge Thomas Griesa will prevent Argentina from making a July 30 deadline for a coupon payment on exchanged bonds, triggering a new default.
At 1.15pm local time (1615GMT) Argentina’s dollar denominated discount bond were down 2.24% at a bid price of $83.30, while its par bond fell 2.52% to $50.30, Thomson Reuters data showed.
The peso currency dropped 1.4% on the parallel ‘Blue’ rate to hover just shy of the psychological 13 per US dollar level.
Latin America’s No 3 economy wants a stay of Griesa’s 2012 ruling ordering the Buenos Aires government to pay the holdouts $1.33bn plus interest.
The funds bought Argentine junk bonds on the cheap after its $100bn default in 2002 and then rejected the terms of restructuring.
Buenos Aires says the holdouts would be making a profit of 1,680% in six years and denigrates them as “vultures” scavenging on the carcass of the 2002 default.
The veteran judge barred Argentina from servicing payments on its exchanged bonds until it settled with the holdouts.
Griesa blocked a late June interest payment which now sits in limbo with the trustee agent BNY Mellon. His order prevents the bank from transferring the funds on.
“The negotiations are extremely complicated and need time. For this reason Argentina wants a stay,” Argentine Cabinet chief Jorge Capitanich told reporters.
Analysts say a last-minute deal cannot be discounted but a default looks increasingly likely as the deadline approaches.
“Argentine authorities seem to have reached the conclusion that to default now and renegotiate later would be the less costly option,” said Carlos Caicedo, principal Latin America analyst at IHS Country Risk.
Capitanich said the government representatives included finance secretary Pablo Lopez, attorney general Angelina Abbona, as well as the economy ministry’s legal and technical secretary Federico Thea.