Argentina's government on Tuesday announced an offer to restructure $100 billion of the country's debt, hoping to regain access to international credit markets and restore investor confidence.
The new proposal includes an offer to include billions of dollars in interest that has gone unpaid for more than two years.
"The proposals center on the sustainability" of Argentina's ability to pay, Economy Minister Roberto Lavagna said at a news conference. "We have adopted several suggestions made by the creditors."
Government officials are scheduled to meet with creditors next week.
Private creditors balked at initial government offers for resolving history's largest government debt default.
Argentine officials for months have proposed a 75 percent "haircut" on the nominal value of the defaulted bonds, a proposal that bondholders said is too extreme.
Many of the bondholders said the loss would be much greater than that in deals offered by Ecuador and Russia when those countries restructured their debt in the 1990s.
Even before the government announced its latest offer, the deal was criticized by some foreign investors who said they had not been told that a new proposal was in the works.
"We know nothing about this," Nicolas Stock of the Global Committee of Argentine Bondholders said before the announcement. The group claims to represent investors in Europe, the United States and Asia holding more than $37 billion in defaulted Argentine debt.
"There have been absolutely no negotiations," Stock said by telephone from Italy.
Argentines are the largest single group of bondholders, with 38.4 percent of the total. Italians hold 15.6 percent while investors based in Switzerland hold 10.3 percent and U.S. investors hold 9.1 percent.
Some analysts said the new offer was an improvement over the previous proposal because it includes the interest payments.
Fernando Navajas, an economist at the Buenos Aires-based think tank Foundation of Latin American Investigations, said the plan "still amounted to a significant loss for creditors but provides some incentives."
Argentina's economy collapsed in December 2001 and defaulted on $82 billion in bonds and other obligations. Interest payments due on the defaulted bonds since have added about $18 billion to the debt.
The economy -- South America's second-largest, after Brazil's -- has begun growing again. But the default has kept many Argentine companies shut out of credit markets, and some economists have warned that growth could slow if the issue isn't resolved soon.
In March, Argentina signed a pledge with the International Monetary Fund to embark on serious negotiations with creditors as a condition for continuing payments from a $13.3 billion loan the IMF awarded the country last fall.
With the economy showing increasing signs of life, creditors want Argentina to improve its offer. Some have said they would like to see an offer that repays as much as 50 cents for every dollar of debt issued.
President Nestor Kirchner has said Argentina cannot fully repay the billions of dollars in defaulted debt.