Other investors are Argentine. Aluar Aluminio Argentino SAIC, a major aluminum producer, is sinking $650 million in a two-year project to increase its capacity by about 44 percent to 400,000 tons a year. Eduardo Elsztain, the country's biggest real estate developer, has just opened a shopping center in Rosario. He has more malls in the works elsewhere in the country and his firm is planning to start construction soon on a $42 million retail-residential-hotel complex bordering a nature preserve near the capital's downtown area. In Elsztain's view, "there has never been a better time to invest in Argentina." As for foreign banks, after shunning Argentina for a while, "now the banks are coming to us," he said.
"It's been tough. We will have restrictions," he said. "But in terms of access to capital, what defines access? Greed. When opportunities look profitable, access to capital will be easy."
A boy plays soccer at a Buenos Aires shantytown. The population of slums just a few blocks beyond fashionable waterfront steakhouses and hotels mushroomed after Argentina's economy collapsed four years ago.
(Marcos Brindicci -- Reuters)
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_____Special Report: Argentina_____
_____Photo Gallery_____
 • A Road to Ruin: The economic crisis in what was once Latin America's richest nation ravaged Argentina's middle class, forcing millions into poverty. (Flash required)
_____Story Archive_____
• IMF Says Its Policies Crippled Argentina (July 30, 2004)
• Argentina Didn't Fall on Its Own (August 3, 2003)
• Scrap by Scrap, Argentines Scratch Out a Meager Living (June 7, 2003)
• Gulf Between the Rich and the Poor Grows in Argentina (May 16, 2003)
• As Crime Soars, Argentines Alter Outgoing Ways (January 27, 2003)
• Despair in Once-Proud Argentina (August 6, 2002)
_____Timeline_____
• Argentina's Economic Collapse
_____Graphics_____
• Biggest Underwriters of Argentine Government Bonds; The More Argentina Borrowed, The More Investors Bought
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During the 1990s, Argentina had no worries about obtaining international capital -- and that was how it went astray. With its free-market policies, a fixed exchange rate of $1 per peso and a near-zero inflation rate, the country was the darling of the International Monetary Fund and a magnet for foreign funds. It depended on international bond markets to cover its budget deficits, and Wall Street was happy to oblige. Once foreign financiers realized the country had piled up unsustainable debts, however, they began to pull their money out. The ensuing default also led to a crash of the peso.
Today the government has no need to borrow from abroad because it has been running budget surpluses. That is attributable in part to soaring prices for soybeans, wheat and other commodities, which have fattened the country's export receipts and tax revenue. It is also partly attributable to the government's discipline in keeping a lid on the wages of public-sector employees. With the government treasury full, economic policymakers here can shrug off the threats by foreign money managers to boycott Argentine bonds.
The rules of global finance have by no means been repealed entirely. Argentina is still paying a steep price for its default. More than 40 percent of the population remains below the poverty line, and obtaining long-term credit remains very difficult, if not impossible, for many companies.
Still, many in the financial community are upset over the ease with which Argentina is breaking loose from the constraints that usually hobble bankrupt countries. The research firm CreditSights Ltd. wrote in a recent report to its investor clients: "Debt repudiation with no consequences . . . appears to be the perfect crime that Argentina is about to perpetrate with its debt exchange."
Objections Abroad
During a tour of foreign cities a few weeks ago to explain the offer, Finance Secretary Guillermo Nielsen was greeted by protests by investors. "Thievery," "coercion" and "extortion" are among the epithets that investors have used to describe the 32 cents-on-the-dollar value of the exchange.
In response, Argentine officials said that the deal was the most the country could reasonably afford, and those who rejected it faced the prospect of collecting nothing.
The Argentine stance has triggered a number of lawsuits from bondholders, some of whom have won judgments -- in U.S. courts, among others -- requiring Argentina to pay its obligations in full. But collecting such judgments has so far been impossible. The assets that the Argentine government holds abroad -- embassies, mostly -- are protected from legal attachment under international conventions.
That helps explain why such a high percentage of creditors, worn down after receiving no payment on their bonds for three years, participated in the exchange despite their disgust with the terms. By reducing the outstanding number of bonds in default, the government has cleared the way for a new loan agreement with the IMF, an important consideration because a serious confrontation with the IMF would cost the country billions of dollars in international aid and throw it back into the pariah camp.
