Argentina Economy Will Likely Contract this Year: U.N.


Argentina's economy probably will contract in 2014, the head of the United Nation's body for Latin American and the Caribbean said on Monday, as fallout from a new sovereign debt crisis would keep the region's third-biggest economy out of foreign debt markets.

The UN's Economic Commission for Latin America and the Caribbean (ECLAC) lowered its gross domestic product growth forecast for Argentina to 0.2 percent earlier on Monday from a previous forecast of 1.0 percent.

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But Alicia Barcena, the head of Santiago-based ECLAC, told Reuters that the forecast was made before the latest debt standoff, and was therefore out of date.

"Our (growth) projection isn't adequate. We made it in July and the situation today is completely different," she said in an interview. "We believe that Argentina will probably have negative growth in 2014."

Argentina missed a deadline at midnight last Wednesday to make a coupon payment on a restructured bond after failing to reach a deal with holdout creditors. A U.S. court had ruled Argentina could only service its exchange bonds if at the same time it paid holdouts in full their defaulted debt.

Barcena said the decision to block the bond payment sets a "bad precedent" for what she calls the "international financial architecture" and underscores that it could impact future sovereign debt negotiations.

"We are very concerned that the relationship between creditors and debtors in debt-restructuring negotiations will be very unbalanced because of this decision," said Barcena.

(By Antonio De la Jara and Anthony Esposito; Editing by Jan Paschal)