Argentina better placed to face market swings -UN

BUENOS AIRES, Aug 21 (Reuters) - Argentina is in a better position than it was around the year 2000 to handle market volatility due to its expanded foreign reserves and lower debt burden, the local director of a U.N. body said on Tuesday.

Financial markets have been roiled in recent weeks by fears that credit troubles in the U.S. subprime mortgage market could create wider fallout in the global economy.

"The impact is totally different from the end of the convertibility (currency peg) period, when we had a huge debt to pay and we depended mainly on capital inflows to sustain a macroeconomic balance, since we didn't have reserves," said Bernardo Kosacoff, the local director of the U.N. Economic Commission for Latin America and the Caribbean, or ECLAC.

Argentina's peso was pegged to the U.S. dollar for more than 10 years until 2002, when an economic crisis spurred a devaluation and a record-large default on some $100 billion in sovereign debt.

In early 2005, Argentina restructured its defaulted debt with about 75 percent of bondholders accepting a deep cut in capital. No separate deal was struck with holdout creditors.

The economy also fiercely rebounded, growing at least 8.5 percent a year starting in 2003.

"When you look at Argentina's position in 2001, the country had to use nearly 50 percent of its exports to service debt," Kosacoff said. "Now we have to pay 13 percent, in part because our exports grew but mostly because we renegotiated the debt and we pay completely different interest rates."

Argentina's economy grew 8.4 percent in the first half of the year, while the South American country's trade surplus exceeded $5 billion and the primary budget surplus hovered around 3 percent of gross domestic product.

The central bank's foreign reserves are at a record high of around $43.7 billion, after falling as low as $9 billion in mid-2002.

The recent market volatility has hit Argentine stocks, bonds and currency hard. But Kosacoff said the country is in much better shape to withstand these pressures than it was six or seven years ago.