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To: stockman_scott who wrote (45306)	12/18/2001 2:59:01 PM
From: Sully-	Read Replies (1) \| Respond to of 65232

Creditors to Argentina: default already! By Hugh Bronstein NEW YORK, Dec 18 (Reuters) - Argentina's foreign creditors are calling on the recession-plaged government to default on its debt by missing an interest payment due Wednesday, a move they say would clear the way for a thorough reform of Latin America's third largest economy. One creditor likened Buenos Aires' current default-avoiding ploys to former President Bill Clinton's widely mocked definition of sex during the Monica Lewinsky scandal. By raiding pension funds and taking other unorthodox steps which allow the government to keep servicing bonds that are about to be restructured anyway, investors say that Economy Minister Domingo Cavallo is wasting precious reserves in a misguided effort to save face. ``It's like the Clinton explanation for not having had sex with Monica Lewinsky,'' said Abigail McKenna, a principal at Morgan Stanley Investment Management, which holds Argentine debt. ``Maybe, technically as per some letter of the law, Cavallo can convince himself that he is not defaulting. But he certainly is.'' Argentina is due on Wednesday to pay about $87 million in interest due on its global bonds due 2008. McKenna and other holders of Argentine debt said it would be a mistake for the government to continue spending money to maintain the illusion of solvency while increasing numbers of ordinary Argentines are having trouble feeding themselves. The government has, among other measures, stopped paying some of its suppliers, such as pharmacies that give subsidized medicine to pensioners, in order to steer money toward making debt payments, economists who specialize in Argentina say. ``He is holding onto one technical definition of default -- like Clinton's definition of sex -- while doing all sorts of distortive things to keep the payments going,'' McKenna added. Clinton was mocked in the Lewinsky scandal of the late 1990s for offering an uncommonly narrow definition of sex that he hoped would allow him to deny having had an affair with the young White House intern. ``We would much rather have them default and then have a discussion about how to solve the problem,'' McKenna said. But indications are the government will make Wednesday's payment. ``They would be doing themselves a favor by not paying and getting it over with,'' said another holder of Argentine debt, who requested anonymity. ``It has to come, so the earlier they take the bull by the horns and manage the aftershock, the better.'' Meanwhile, with police guarding some supermarkets from hungry looters, Argentine provinces appealed on Tuesday for emergency food aid from the government. ``They have no economy left all because they are delaying the inevitable,'' the bondholder said. Several provincial governments, worried by a flare-up of social protests, asked President Fernando de la Rua for help after some supermarkets were raided in recent days. Argentine bond prices are so low that a default is seen having little impact. ``If a default is not priced in, it is close to being priced in,'' the investor said. ``There will be a dip in Argentine asset prices when the default comes, but the contagion effect will be minimal.'' THE SHORT, UNHAPPY LIFE OF THE GLOBAL '08 Issued about six months ago, Argentina's global bond due 2008 began trading at 78-1/2 cents on the dollar. Since then the bond has been trounced by fear of default. It traded at about 32 cents on the dollar on Tuesday. ``If he (Cavallo) would have put up the white flag a month ago at least Argentina would still have a healthy banking system. Now we having people rushing to take their money out of the banks,'' yet another U.S. holder of Argentine debt said. ``The more they drag this out the worse it is for everyone.'' In the recently conducted domestic portion of Argentina's debt exchange, local creditors were invited to swap their bonds for loans which are guaranteed by Argentina's stream of tax-revenue. The international portion of the swap is expected to start in the second half of January. Although it is widely understood that the government needs to lighten its debt payments in order to resume sustainable economic growth, fund managers must answer to their superiors and their investors who will want to know why they are voluntarily accepting bonds that pay less than the current instruments. ``How can we responsibly tender into an exchange unless the country says it is ceasing payment?'' the bondholder asked. biz.yahoo.com