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Argentina returns to credit markets after 15 years

AFP  |  Buenos Aires 

Argentina has made its return to international financial markets, receiving offers from investors for its sovereign bonds in its first debt sale in 15 years, a government source said.

Latin America's third-biggest economy is seeking to end 15 years of financial isolation by borrowing cash on world credit markets for the first time since a 2001 default.

"We have started to receive offers. We will know the total amount" today, a source in the finance ministry, who asked not to be named, told AFP yesterday.

Argentine newspaper La Nacion cited sources involved in organizing the debt auction that the government had received offers worth USD 67 billion -- five times the amount of bonds available.

The country is looking to boost its struggling economy and settle a 15-year lawsuit by US investment funds which its ex-president Cristina Kirchner branded as "vultures."

Now that a US court has cleared the way for Argentina to start borrowing again, the government planned to issue a reported USD 15 billion in medium- and long-term bonds.

"Argentina is back," said Finance Minister Alfonso Prat-Gay in Washington ahead of the sale.

Argentina's new conservative president Mauricio Macri has claimed the return to the international financial fold as a victory.

His opponents said poor families would bear the cost of his borrowing since public spending cuts would be imposed to pay off the debts eventually.

Macri has been scrapping Kirchner's protectionist policies and opening up Argentina's diplomatic and financial ties.

He has removed currency controls and raised utility prices, triggering angry protests from Argentines who say their spending power is declining.

The bond sale "is a major step forward," said Agustin Carstens, head of the IMF world lender's Monetary and Financial Committee, on Saturday.

"It is very good to have a country as important as Argentina putting the house in order."

He warned however that Argentines would have to endure tough economic cutbacks to stabilize the economy and public finances.

"Needless to say in the short term some measures may be difficult to digest," Carstens said in Washington.

The IMF forecasts that Argentina's economy will contract by one per cent this year and grow 2.8 per cent in 2017.

Prat-Gay has given a stronger forecast of around zero growth this year and growth of up to four percent next year.

South American countries generally borrow at 3 to 4 per cent interest, but analysts forecast Argentina would have to offer a higher rate of up to 9 per cent in its new bond issue.

After the 2001 crisis, some Argentines object to taking on new debt -- not least Kirchner and her allies.

First Published: Tue, April 19 2016. 04:02 IST