Argentina's battle-scarred creditors demand tough IMF stance

LONDON, Nov 10 (Reuters) - Argentina’s international creditors, scarred by this year’s turbulent debt restructuring, want the new International Monetary Fund programme the country is seeking to come with ultra-rigorous conditions.

Argentina and its provinces restructured $100 billion of debt two months ago, but the country’s bonds have lost nearly 30% since their relaunch as worries about the government’s economic strategy have persisted.

On Monday Economy Minister Martin Guzman, who led the restructuring for Latin America’s No. 3 economy, said Argentina would seek an IMF Extended Fund Facility (EFF) to replace the failed $57 billion programme agreed under Mauricio Macri’s government.

An EFF is a longer-term programme that typically requires more economic reforms than ‘standby’ IMF agreements. A tougher stance is something creditors will welcome.

“We want the programme structured so the debt is declared (by the IMF) as sustainable with a high probability,” said Mangart Advisors’ Riccardo Grassi, who was heavily involved in the recently finalised debt deal.

“If we have to say, ‘no, this programme to us doesn’t work,’ then that is something that we will say,” he said, adding creditors were prepared to write to the IMF too if needed.

The main investor groups have already raised concerns that Argentina has “failed to restore confidence” since their restructuring agreement provided around $70 billion of debt relief.

It is headed for a near 12% economic contraction this year due to the coronavirus pandemic and is locked in a spiralling currency crisis with dwindling reserves that has seen the peso changing hands in the black market at roughly half its official value.

The IMF could recommend a steep official devaluation to try and solve the problem though it would be a difficult politically for the government, which vowed just last month that it would not do so.

Mangart’s Grassi, thinks there could be a middle ground. Instead of one big devaluation, there could be small monthly 1%-1.5% devaluations for up to a year providing more time for the country to adjust.

The devaluation and differences over spending could see the IMF and government’s talks roll into next year, but they are key issues all investors see as crucial to get the country back on track.

“Getting the currency under control would be good but I’m not sure if there is any magic solution,” said North Asset Management’s Peter Kisler, who also holds Argentine bonds.

“There is a lack of faith in the government at the moment and the technicals aren’t good, but you have to try look forward”.

Reporting by Marc Jones; Editing by Steve Orlofsky