Barely in time. In late April, the interest-rate premium investors demanded for Argentina's benchmark FRB Bond exceeded 1,200 basis points over the rate for U.S. Treasuries. The debt swap was probably the most palatable solution. And the swap should be successful. It's not just Cavallo's handling of the debt problem that has been disappointing.
Local banks hold most of the government debt.
If Argentine depositors get too uneasy about the overall economy, they may yank money from the banks, which might not be able to sell the new bonds fast enough to cover any shortfall. The debt swap will likely save Argentina from financial disaster for the near future. Cavallo will soon see, though, if Wall Street likes his medicine. This patient isn't cured by a long shot. The McGraw-Hill Companies Inc. All rights reserved.