A delegation of top Argentine financial officials flew to New York last week to assure U.S. bankers that their country wants to continue paying promptly on more than $30 billion of foreign debts, despite the financial freezes that Britain has placed on Argentine assets because of the Falkland Islands dispute.
Britain's move has affected all Argentine assets on deposit in the United Kingdom, and U.S. bankers report that Argentine officials say they will not "make payments to British entities" during the crisis. The dispute could cause severe disruptions in the international banking system if Argentina defaults on any of its multinational loans, many of which are managed by London-based banks.
Argentina owed approximately $8.6 billion to U.S. banks as of January, according to the Federal Reserve Board. Most loans to Argentina are group efforts by a number of banks, including some in the United States, and if Argentina does not pay a British participant in a loan, the British bank could force the entire loan into default.
Argentina, heavily dependent on external financing, is due to make more than $5 billion in principal and interest payments to its creditors this year, sources say. It is concerned that the crisis will close off its access to further credit, preventing it from meeting its debt obligations.
However, U.S. bankers say that so far both sides seem anxious to avoid a damaging showdown. British bankers are worried that London's role as a major international banking center could be damaged by the dispute and therefore are unwilling to push Argentina into default, U.S. bankers said.
An official at the Argentine Embassy indicated that, if banks agree to roll over existing debts, Argentina may not need to raise any new money to meet its short-term commitments. U.S. bankers said the British regulations, which technically do not freeze Argentine deposits but rather require banks in Britain to ignore any instructions from Argentine depositors, do not prohibit banks from rolling over (automatically renewing) loans that come due.
The Argentine delegation was headed by central bank Director Ubaldo Aquirre and included Guillermo Blanco of the cconomics ministry and Juan Carlos Iarezza, the Argentine representative at the International Monetary Fund in Washington and financial minister at the embassy here. They met with officials of New York's biggest banks, including Citibank, Chase Manhattan, Manufacturers Hanover and Morgan Guaranty Trust, U.S. bankers said.
The officials got a "positive" response from bankers, according to a first secretary at the Argentine Embassy. They told bankers that the nation intends to keep its commitments to all its creditors, he said. The Argentine central bank has set up an escrow account into which it will pay the principal and interest due on loans to British banks.
U.S. bankers said that the impact of the British freeze has not yet been felt, in large part because few payments were due last week and also because the British regulations, announced April 3, were not printed until April 6. Argentine banks were closed Thursday and Friday, and banks in England were closed Friday and yesterday.