New economy minister debuts with Paris Club

Future Argentine economy minister, Martín Lousteau, received yesterday his French counterpart Christine Lagarde in Treasury Palace to analyse next steps with Paris Club.

Before taking office, Martín Lousteau had his first formal meeting as virtual Argentine economy minister. It was with his French counterpart, Christine Lagarde, in a reunion with more than one reading. "Fixing defaulted debt will be one of the priorities of next administration," Lousteau stated.

Main topic dealt with was the need to restructure debt to Paris Club, since France is one of the main creditors. However, it also shows the intention of improving relation with one of the first-world countries, which, during the last years, did not have a close contact with Argentina. However, with Cristina de Kirchner inauguration and Nicolas Sarkozy seizing power in France, a new period may start.

"Of course that Paris Club issue was present in the meeting and both parties agreed on the need to start working to find a solution to the unpaid debt. However, no progress was made on specific matters," one of the witnesses of such summit explained. Moreover, Christine Lagarde made a clear reference to the French origin of future economy minister Lousteau.

The incoming finance head explained that it was a priority for Argentina to increase investments so as to strengthen growth. And, in that sense, he added that fixing debt to Paris Club (adding up to more than $5 billions) would be crucial to attract foreigners.

Plan outline

During administration of Argentine economy minister Miguel Peirano, some restructuring plans were outlined, though never approved by Argentine president Néstor Kirchner. Now, Treasury Palace and future president will have to make a real proposal, which should be ready by the first quarter of next year at the very latest.

Meanwhile, government will have to weigh up alternatives with main creditors. No capital deductions will be asked (as it happened in private creditors' negotiation). Rather, a term extension and rate reduction. In 2008 Budget, government provided more than $800 millions to face first payment of restructured debt.

Lousteau meeting with Lagarde can be taken as the "starter" before the "main course" as regards negotiation with Paris Club. It will be tomorrow midday, when the already economy minister together with Argentine Central Bank head, Martín Redrado, will have lunch with IMF managing director, Strauss Kahn, who will be accompanied by the entity's western department head, Anoop Singh. The chief of IMF is already in Buenos Aires city to take part in inauguration ceremony of Cristina de Kirchner. He will meet on Tuesday with economy officials and then he will hold a formal meeting with the president.

In both meetings, future role of IMF in talks with Paris Club will be outlined. It's believed that the organization will try to make restructuring easier, even without having an explicit agreement with the country. For the time being, they have to discuss when an IMF mission will land in Argentina to monitor the status of economy. This will take place during the second quarter of 2008, within the framework of the so-called Article IV, which provides annual supervision of IMF on all member countries.

Then, creditor countries will have to define whether Argentina's relation with IMF is enough to reach a renegotiation agreement. "If there's willingness, this is solved in five minutes. Otherwise, it may take quite long," officials from Argentine Central Bank hold, taking into account comings and goings observed during the last two years.