The massive refinancing plan Argentina and its 11 key creditor banks accepted late Sunday will be difficult to sell to the 320 or so banks around the world that have lent Argentina about $25 billion, banking and government sources said yesterday.
Major bankers and government officials said they were pleased that Argentina, which had dragged its feet for two years, finally came to terms with its bank creditors. Argentina agreed to an economic austerity program with the International Monetary Fund in September that set the stage for the bank negotiations completed Sunday.
But banking sources said it will be far more difficult to sell the Argentine package to banks than it was selling refinancing for other big debtor countries, including Mexico, Brazil and Venezuela. Some bankers also said they do not believe Argentina will be politically able to carry out the IMF austerity program.
The package Argentina and the 11-bank negotiating committee agreed on calls on Argentina's bank lenders to boost their exposure to the debtor country by $4.2 billion, or 16.75 percent, next year -- an increase that several bankers said would be considered large even in good times. But at a time when Argentina's economy seems to be spiraling out of control, bankers might be even more reluctant to make large new loans to Argentina, whose total foreign debt is about $45 billion.
The package also stretches out for 10 years to 12 years repayment of $13.4 billion in loans that have come due or will come due by the end of 1985.
Several bankers said yesterday that they lack confidence that the government of Raul Alfonsin will be able to take the tough economic steps it agreed to take when it got a tentative package with the IMF last September. In the IMF program, which the agency's executive director will submit to the IMF's board for approval when most of the $4.2 billion negotiated Sunday has been committed, Argentina agreed to take steps to cut the government budget deficit, devalue the peso and hold down wage increases.
Bankers said the Alfonsin government realizes it must take tough steps to try to check the country's runaway 700 percent inflation rate. But they said political pressures for real wage increases -- which Alfonsin promised when he took office last December -- will make it nearly impossible for him to take the required steps.
The bankers noted that shortly after Argentina agreed to the tentative pact with the IMF in September, the government handed out a 14 percent wage increase. Argentine officials were summoned back to Washington by IMF Director Jacques de Larosiere to explain their action.
The negotiating committee -- headed by Citibank executive William R. Rhodes -- said Sunday it hoped banks in the United States, Europe and Japan would agree to the complicated package before Christmas. Rhodes said yesterday that Argentine officials, key bank officials and IMF Deputy Director Richard D. Erb would travel to Europe, Japan, Canada and throughout the United States in an attempt to sell the package.
But an economist at a major U.S. regional bank said the Christmas deadline probably is too optimistic. "Nobody is in a hurry to accommodate Argentina. They made us wait two years," the economist said.
Bankers conceded, however, that parts of the package are enticing -- especially to U.S. banks, which have had to put a large portion of their Argentine loans on problem status.
Argentina agreed to pay at least $750 million in back interest by the end of the year and more than that if it can find other sources of funding. The U.S. Treasury has agreed to provide Argentina a $500 million bridge loan when the banks agree to the pact worked out Sunday. But for Argentina to pay even the $750 million -- its total arrears are about $1.2 billion -- it needs the Treasury loan, which will not be made unless and until most banks sign on.
Argentina also promised to repay the $750 million still outstanding on a $1.1 billion bridge loan it received in 1982. But it will need the first disbursement of the new $4.2 billion bank loan to do so.
"There isn't a lot of enthusiasm for Argentina," one bank official said. A number of European banks are involved and many of them are more reluctant than U.S. banks to loan the country more funds.
At the same time, one banker said, the banks realize they have little alternative to a package similar to the one negotiated Sunday unless they want to court a default or repudiation.