VZCZCXYZ0000
PP RUEHWEB

DE RUEHBU #2540/01 3180907
ZNR UUUUU ZZH
P 140907Z NOV 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 6449
INFO RUEHFR/AMEMBASSY PARIS PRIORITY 1147
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHMFIUU/HQ USSOUTHCOM MIAMI FL PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY

UNCLAS BUENOS AIRES 002540 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR AFAIBISHENKO,AJEWEL,WBLOCK 
E FOR THOMAS PIERCE, WHA FOR WHA/BSC AND WHA/EPSC 
PASS NSC FOR JOSE CARDENAS 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
EX-IM BANK FOR MICHELE WILKINS 
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI 
PASS USTR FOR SUE CRONIN AND MARY SULLIVAN 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
US SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: EFIN ECON AR
SUBJECT: LATEST ON ARGENTINA'S PLANS TO NEGOTIATE PARIS 
CLUB DEBT AGREEMENT 
 
Summary 
------- 
¶1. (SBU) In advance of the Paris Club Tour d'Horizon on 
November 15, 2006, Post provides the following status report 
on Argentina's pursuit of a deal on its $7.2 billion debt to 
Paris Club creditors.  GoA Finance Secretary Mac Laughlin 
wrote the President of the Paris Club November 9 officially 
conveying the GoA's interest in restarting negotiations.  His 
staff denies press reports that the GoA has already completed 
a draft proposal that includes substantial rescheduling and 
separate treatment for a 2001 Spanish loan (totaling almost 
$1 billion including interest).  Post's local contacts among 
Paris Club creditors -- including the Spanish Embassy -- 
assert that their governments support Paris Club solidarity 
and will not negotiate one-off bilateral deals with the GoA. 
End Summary. 
 
Press Reports re GoA Debt Rescheduling Offer 
-------------------------------------------- 
¶2. (SBU) In a flurry of recent articles, the local press is 
reporting that the GoA is gearing up to negotiate a repayment 
agreement of its $7.2 billion debt to Paris Club creditors 
(see background, para 8).  The reports state that Economy 
Minister Felisa Miceli's objective is to submit a GoA 
proposal for debt rescheduling to the Paris Club prior to the 
end of the year.  The reports suggest various scenarios, all 
of which involve rescheduling payment periods as long as 10 
years and rates just above LIBOR.  The articles cite GoA 
sources stating that the GoA will not seek a reduction 
("haircut") in the nominal level of the debt, but the GoA 
proposal would result in a lower net present value.  (Note: 
Paris Club creditors have stated that a GoA request for debt 
restructuring is a non-starter without a current IMF 
agreement.  End Note). 
 
¶3. (SBU) GoA sources are quoted as stating that President 
Kirchner would prefer to offer preferential treatment to the 
government of Spanish President Jose Luis Rodriguez Zapatero, 
referring to the roughly $1 billion principal and interest 
Argentina owes Spain from the 2001 loan.  Notwithstanding 
press reports from the November 4-8 EU-Mercosur Summit in 
Uruguay, which implied that Spain and Argentina had reached a 
bilateral repayment deal outside of the Paris Club process, 
the GoA sources say it is not a viable option, as it would 
conflict with Paris Club statutes.  The GoA sources add that 
Economy Ministry consultations with the Paris Club will 
determine whether or not to include the Spanish loan as part 
of an overall package. 
 
Finance Confirms GoA Intent to Negotiate but Denies Press 
Speculation of Proposal 
--------------------------------------------- ------- 
¶4. (SBU) Finance Secretary Alfredo Mac Laughlin's November 9 
letter asks the Paris Club President to "convey to Paris Club 
member governments the desire of the Government of Argentina 
to restart, as soon as possible, negotiations that would 
allow a rapid normalization of our financial relations." 
Secretary Mac Laughlin's top advisor, Juan Carlos Barboza, 
 
SIPDIS 
confirmed to Econoff November 13 that the GoA will seek to 
normalize relations with the Paris Club by the end of the 
year, but disavowed the "speculation" in the media regarding 
GoA proposal details. 
 
¶5. (SBU) Barboza is a member of the Economic Ministry's Paris 
Club working group that is preparing the GoA proposal.  He 
said the team has not yet agreed on details, and planned to 
make the first formal approach to the Paris Club next week. 
He agreed with recent press reports that the issue of whether 
or not to include the 2001 Spanish debt will come out of 
conversations with the Club, and highlighted that the earlier 
reports out of Uruguay claiming the two sides had reached a 
deal were erroneous.  (Comment:  Barboza has admitted to 
Econoffs in the past that a new deal with the IMF is out of 
the question.  Nevertheless, the GoA plans to seek a creative 
solution that will include rescheduling payment terms and 
limiting upfront payment of arrears, not too dissimilar from 
 
 
 
recent press "speculation."  End Comment). 
 
¶6. (SBU) Barboza added that Secretary Mac Laughlin met with 
Minister Miceli on Friday evening, November 9, and left with 
the understanding that he is fully authorized to take the 
lead on talks with Paris Club creditors.  Mac Laughlin will 
begin consultations with Paris Club creditors' Ambassadors to 
Argentina following his return from the November 18-19 G-20 
meeting in Australia. 
 
G-7 Plus Reps in Argentina agree on Paris Club Solidarity 
--------------------------------------------- ------- 
¶7. (SBU) Econoff's have shared notes on Paris Club issues and 
promoted Paris Club solidarity with the Economic Counselors 
of all the G-7 countries, plus Spain.  The French and Italian 
counterparts have been most strident in their support, but 
all of our local contacts among Paris Club creditors -- 
including the Spanish Economic Counselor -- assert that their 
governments support Paris Club solidarity and will not 
negotiate one-off bilateral deals with the GoA.  According to 
the Spanish Economic Counselor -- who has also clarified that 
Spain and Argentina did not/not conclude a bilateral deal on 
the margins of the EU/Mercosur Summit in Uruguay -- Spain is 
prepared to discuss Argentina during the November 15 meeting 
in Paris. 
 
Background on Argentina's Debts to Paris Club Creditors 
--------------------------------------------- ------- 
¶8. (SBU) As of August 2006, Argentina owed approximately $7.2 
billion to Paris Club creditors, of which over $3.5 billion 
consisted of arrears and past due interest.  The $7.2 figure 
includes Spain's 2001 loan to Argentina, which with interest 
now totals close to $1 billion.  Spain and Argentina have 
argued for treating this loan outside of the Paris Club 
context, because Spain provided it in conjunction with an IMF 
bailout package in 2001.  Other Paris Club creditors do not 
agree.  An additional $2 billion in principal payments comes 
due between 2006 and 2008.  As of November 2006, Argentina 
owed $359.2 million to the United States, of which over $300 
million was in arrears. 
 
Comment 
------- 
¶9. (SBU) Argentina's media is notoriously unreliable, 
especially on issues related to the economy, and has on 
several occasions over the last month incorrectly reported 
GoA preparations on dealing with Paris Club debt. 
Nevertheless, internal thinking in the Finance Secretariat 
appears to vary little from what the news outlets are 
reporting, so it seems probably that GoA officials are 
leaking details of a possible proposal.  If so, it appears 
that the GoA is not being very realistic, as Paris Club 
creditors have already indicated that given Argentina's high 
reserves and aversion to a new IMF program, the best way to 
normalize relations would be to clear its $3.5 billion 
arrears.  End Comment. 
WAYNE