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US bondholders in default insist that it is easier for Argentina to negotiate
iEco
May 16, 2008

Nancy Soderberg, formerly of the National Security Council under Bill Clinton and co-president of the US bondholder association ATFA believes that the alliance between Argentina and Chavez for seeking finance, to the detriment of the international community, is damaging to the country's growth. On a visit to Argentina, she met with Ambassador Earl Anthony Wayne.

By Mara Laudonia | mlaudonia@claringlobal.com.ar

More than six years since the Argentine default, the bondholders that stayed out of the swap continue to lobby in favor of their interests and seek to force the Argentine government into a new negotiation.

Nancy Soderberg represents those interests and is co-president of ATFA, strongest bondholder association in the United States. She says that Argentina has two ways to continue growing: continue as is, being financed through the help of Venezuela at a high financing cost, or to go well to the global markets at "a cheaper cost" to continue at sustainable growth levels.

And to follow this last option, she reasons, the country will have to sit down at once with the bondholders that have stayed out of the debt swap of 2005, whose holdings total a little more than US$28 billion, Soderberg said, who came to Argentina to take in the situation in the country, and had contact with different local bondholders and even with Ambassador Earl Anthony Wayne to speak about the issue.

Soderberg was an official with Bill Clinton at the National Security Council and is co-president of ATFA with Robert Shapiro, former U.S. undersecretary of Commerce. Both represent some thirty of the most powerful bondholders in the United States, with holdings of US$3 billion, among them the Elliott fund which has filed various lawsuits against the country in the New York courts and teachers' pension funds. That is to say, they are treated as major players, accustomed to dealing with defaults of various countries in the past, and where some still keep buying Argentine debt in default.

They also can count on the support of rural producers in the United States, who are working with the strong lobby that this group is making before the Administration and the U.S. Congress to show that Argentina hasn't yet found itself in the same situation as in 2001, and that "it sees itself as a sophisticated and rich country" that at some time will need "the international market to be able to grow at a sustainable rate."

Soderberg, who notified the Argentine government of her pass through the country but did not receive any invitations to be received by any official, argues that the government should have to be very careful with the choice of its financial supporter, whether it's Hugo Ch vez or the international community: "I would be very careful right now about choosing friends: it's a mistake to get close to Hugo Ch vez, who represents the wrong direction for Latin American and who grants "very expensive lines of finance" to the country. "If the government wants to promote a high rate of growth, it will have to go to the international capital markets and offer a new proposal to the bondholders that fell outside the swap," she said.

However, and due to the initiative that was generated in certain sectors during the electoral campaign, until this moment the President has not given signs of wanting to approach this issue. The government, which managed to avoid paying its judicial sentences, is limiting itself only to exercising its defense in the U.S. courts, through the law firm of Cleary Gottlieb.

For Soderberg, the U.S. government is "internalizing every day more" the issue, and its criterion, whoever wins the U.S. elections, be it Democrat or Republican, will not be any different: "both will try to encourage Argentina to reach a solution with the holdouts."

Since the swap culminated, the administration of George Bush more inclined for market solutions showed itself to be very cautious at the time on taking a position about the holdouts. Until now ATFA has only managed one mention published by the State Department around the recognition of the holdouts' situation, in an annual document from 2007, about the state of bilateral relations. With respect to the IMF, the institution still does not have more power of persuasion on this matter, wince the time Argentina paid all its debts with the organization at the end of 2005.

With respect to the Paris Club, the question takes another color, due to other countries involved who suffer the complaints of the small investors that are asking for a reopening of the swap. The ATFA representative recognized that "it's technically possible" to hold the operation without having negotiated first with the holdouts, but that "it would be realistic to agree to an offer for both" parties.

"The restructuring with the Paris Club serves Argentina to begin to re-establish trust in the international community but it's not enough. It's the government's decision when it wants to sit down and negotiate, but the longer it waits to make an offer the bigger the costs will be in terms of economic growth," the lobbyist said.

"We believe that the US$50 billion in reserves serve to show the backing that Argentina has to comply with its obligations. That means that the country is in good shape to reach a solution, but it's up to the government," Soderberg concluded during her chat with the media.

Nevertheless, the issue of the holdouts is day by day completely off the President's agenda, as she tries to deal with the domestic issues around the farm sector. In any case, the preparations should move forward soon to renegotiate with the Paris Club, one task that was suspended after the exit of Mart n Lousteu.

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