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Mere months can be a lifetime in the economic wonderland of Argentina. Just last year, Amado Boudou, then an obscure bureaucrat heading the Administración Nacional de la Seguridad Social (ANSES), the state social security office, frightened investors even as he ingratiated himself with President Cristina Fernández de Kirchner and her husband and all-powerful predecessor, Néstor Kirchner, by convincing them to nationalize the private pension fund system. The controversial move reaped enough capital for the government to stave off the danger of a foreign debt default only eight years after the last one. And for this, Boudou was rewarded by being named Economy minister this past July.
Now, with the financial markets abroad and in Argentina on a sharp upswing, Boudou faces the reverse situation: wowing enthusiastic investors without angering the Kirchners and the populist hardliners in their Peronist constituency. "We think Boudou is for real," says Alberto Ramos, a New York–based economist for Goldman, Sachs & Co. "The positive market reaction has been a validation of his policy statements — hopefully enough to convince the Kirchners to give him a green light."
Boudou’s chances of pulling off this tightrope act between eager investors and the skeptical Kirchners suddenly look promising. Sure, the nationalization of the ten private pension funds along with their $26 billion in assets and $3 billion to $5 billion in annual pension contributions still rankles some. "This is the most blatant act of financial piracy in Argentina’s recent history," asserts Claudio Loser, former head of the Western Hemisphere department at the International Monetary Fund and now a senior fellow at Inter-American Dialogue, a Washington think tank.
But Boudou is moving swiftly to deal with the consequences of another act of financial piracy that has deprived Argentina of access to the capital markets for years: the failure to compensate those foreign creditors who didn’t accept the steep discounts on their Argentinean bonds offered by the government after its record default on $110 billion in foreign debt in 2001. These so-called "holdouts" claim to be owed about $28 billion, including past-due interest, and they are pressing legal actions around the globe against the Argentinean government. "Anytime Argentina tries to raise money in a major capital market abroad, those funds may be seized to meet court judgments," warns Robert Shapiro, co-chairman of Washington-based American Task Force Argentina, which lobbies on behalf of U.S. holdouts.
Boudou, who declined to be interviewed, is on the verge of a deal with a substantial number of the holdouts. On October 22 he announced that he will ask Argentina’s Congress to suspend a law prohibiting the government from negotiating with the holdouts. Although Boudou did not offer specific details about the terms of a proposed deal, Argentinean officials and sources close to the negotiators for a large group of the holdouts say the agreement includes the following terms: There would be a discount bond with a haircut slightly more than the 65 percent accepted by three quarters of private sector bondholders in 2005; and, in return for the new bond, investors would pay ten cents on the dollar as a fee for participating.
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