Uruguay worried about Argentine debt crisis, but says risks mitigated

MONTEVIDEO, June 18 Wed Jun 18, 2014 3:16pm EDT

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MONTEVIDEO, June 18 (Reuters) - Uruguay is worried about a debt crisis in neighboring Argentina, Economy Minister Mario Bergara said on Wednesday, the first country to voice concern about the spat some fear could trigger a new default.

"It affects us, but not that much as to destabilize our economic process, thankfully," Bergara said. "The risk has been mitigated, but that doesn't mean we're not eyeing the situation with attention and worry."

On Monday, the U.S. Supreme Court declined to hear an appeal by Argentina in its battle against the hedge funds which refused to take part in its debt restructuring.

Argentina then said it was taking steps to pay restructured debt under local law, which would essentially bypass the rulings and raise default risks.

However, Argentina earlier on Wednesday said the exchange offer was not currently under way and the country was open to negotiations to solve the problem.

The specter of another financial crisis in Argentina has so far not sparked fears of contagion, largely because Latin America's third-largest economy has been disengaged from global markets since its 2001-02 default.

Uruguay's economic exposure to Argentina is smaller than a decade ago when the small agricultural country of 3 million suffered its biggest ever financial crisis after its much larger neighbor defaulted on $100 billion in debt.

Uruguay used to be a financial haven for Argentina, but only 16 percent of bank deposits currently belong to Argentines.

Uruguayan tourism, however, does remain heavily dependent on wealthy Argentines, who are fond of holidaying in the glamorous Punta Del Este resort. (Reporting by Malena Castaldi; Writing by Alexandra Ulmer; editing by Andrew Hay)

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