Argentina offers creditors "social reality" tour

The government will invite foreign creditors to see "the social reality" of Argentina after an economic crash and debt default two years ago propelled millions into poverty and unemployment.

"The government is going to invite a group of creditors to talk with various sectors and see the social reality of Argentina," an economy ministry source, who asked to remain anonymous, said. The source did not say which creditors will be invited.

President Nestor Kirchner has taken a hard-line stance with foreign creditors, arguing that the government must spend its funds first on alleviating poverty, which affects one in two people in Latin America's No. 3 economy.

The government wants to pay creditors 25 cents on the dollar after defaulting on $88 billion in bonds in January 2002, but investors are seeking 65 cents on the dollar.

Argentina's jilted bondholders say it's the government that needs a dose of reality.

"If the tour is part of a negotiation that's fine," said Hans Humes, a manager at the Van Eck Global Opportunity Fund and co-chairman of the Global Committee of Argentina Creditors.

The government is facing pressure from leading Western governments and Japan as well as the International Monetary Fund to make progress on effectively stalled talks.

The invitation is the latest move by the government as it attempts to convince the international community that it is negotiating in "good faith" with thousands of creditors from Milan to Tokyo and New York.

This month, Argentina tried to win over investors and the IMF by naming banks to advise on the restructure and allowing mainly foreign-owned utilities to raise frozen rates.

An IMF team arrived in Argentina early this week to carry out a second review of Argentina's economic program, on which $13 billion in IMF loans depends.

Argentina says it has met most macroeconomic targets of the loan program. The IMF's "doubt" is whether there is good faith in debt talks, the government says.

After months of delay, Argentina picked three international banks -- Barclays Capital, UBS Investment Bank and Merrill Lynch to help manage the restructuring.