Argentina Ready to Renew Foreign Interest Payments

Argentina is ready after a two-year lapse to resume interest payments on its $60-billion foreign debt, but creditor banks apparently want more than the government is offering, according to reports published today.

Negotiations are set to resume next week in New York.

Citing sources in the Economy Ministry, the daily Clarin reported that the government is prepared to pay $70 million a month for three months, but creditor banks want a minimum $100 million a month for the rest of 1990.

The daily La Nacion reported that foreign bankers don’t want monthly payments at all but rather a lump sum before negotiations resume.

The 11-month-old government of President Carlos Menem is seeking debt forgiveness, approval for debt capitalization and new loans. Its mission to New York will be led by the president-designate of the Central Bank, Javier Gonzalez Fraga.

Fraga told the financial daily El Cronista Comercial that foreign banks basically want “interest payments. They have received virtually nothing in more than two years.”

Negotiations with a steering committee that represents banks owed about $40 billion are likely to be difficult. Citibank, for example, reportedly has written off 40% of its loans to Argentina as uncollectable and resents having done so.

Overdue interest may total $8.5 billion this year, the government conceded in a letter to the International Monetary Fund last Friday.

Nevertheless, the IMF indicated that it approves of Menem’s policy of budget austerity and privatization, and unblocked payment of a $1.7-billion loan granted last October and suspended five months later.

In the letter, the government pledged to pay $500 million in overdue interest but acknowledged that full payments won’t be made for at least three years.

Argentina, emerging from two bouts of hyper-inflation, is mired in recession.