Nano, like everything else in Argentina, benefits from debt turnaround

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Mar. 31, 2005 — Argentina is known for many things — world-class beef, tango dancing and a brilliant blue sky, to name a few. But nanotechnology? Perhaps, if the government’s recent success at restructuring the national debt results in new domestic and foreign investments.

Government officials and scientists have been pushing nanotechnology research for years, allocating research funds and facilities in the government’s nuclear lab to nanotech. A series of nanotech conferences have taken place. A nano collaboration with the European Union is in the works.

But economically speaking, Argentina has seen more storm clouds than blue skies the past three years after it posted the largest default on a sovereign debt in history in 2002. Experts say now that bondholders look set to accept an Argentine proposal to restructure the debt and the country is poised to emerge from default, everything from soybean exports to nanotech research stands to benefit.

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“The main significance of this is that you are going to have a much clearer outlook for foreign and domestic investment,” said Fernando Losada, director of emerging markets research at ABN Amro and one of the leading economic analysts covering Argentina.

The problem, according to Losada, was many years in the making. Its roots go back to an economic policy that pegged the Argentine peso to the American dollar, a 1-to-1 ratio that kept interest payments manageable but crippled the country’s ability to export goods. When the government abandoned the policy in 2002 and the Argentinean currency rapidly devalued, the country found itself holding debt in U.S. dollars but with only pesos — now worth much less — to pay for it.

In September 2003 the government made its first offer to bondholders — worth approximately 9 cents on the dollar. Bondholders, unhappy with the offer, refused. A second offer in June 2004 was worth about 24 cents per dollar but still was not accepted.

Over the ensuing year, explained Losada, the overall economic outlook shifted in favor of emerging markets, effectively making that June 2004 offer worth about 30 cents per dollar — enough to gain the support of a majority of Argentine bondholders in late February. Initial government reports said between 70 percent and 80 percent of bondholders had accepted the offer.

Losada declined to opine whether the restructuring would specifically help technology-based development efforts, but he acknowledged that a rising tide would lift all boats, so to speak: “It would be in the best interest of all the private interests in the country to have the sovereign debt settled,” he said.

To date, the country’s nanotech efforts have focused more on basic than applied research. An interdisciplinary research team jointly located at the national Atomic Center and the Balseiro Institute, both near the country’s western border with Chile, is conducting research into nanoscale effects in magnetism, semiconductors, superconductivity, surfaces and other fields. One of the research groups’ goals is to develop the region into an internationally recognized hot spot for nanoscale materials research and development.

But commercialization beckons. This past November, Argentina and the European Commission held a joint workshop in the Argentine capital of Buenos Aires to promote nanoscience and nanotechnology capabilities in Argentina and help integrate them into the EU’s research activities. (Argentina and the European Union signed a cooperative agreement on science and technology in November 2000.) The workshop was also intended to help forge networking links and promote collaborative projects between European and Argentine researchers.

Nine European researchers representing England, France, Germany, Ireland, Italy and Spain participated, presenting papers alongside their Argentine colleagues in the fields of biosensors, nanotubes, nanoelectronics, computational modeling, micro/nano fabrication and nanomaterials. As a result of the workshop, the European researchers committed to collaborative projects between Europe and Argentina and to submit joint proposals to Europe’s Sixth Framework Program, a European initiative to fund scientific research.

The European researchers also committed to reviewing whether Argentine institutes could be incorporated into ongoing European networks of excellence. A follow-up workshop in Argentina is slated for late this year.

At what point such research efforts would connect with the private sector is harder to predict. Economist Losada says it’s clear the debt relief will make it much easier for investment funds to flow into the country again, but timing is another matter. “How quickly it is going to happen,” he said. “I just don’t know.”


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Statistics

Argentine Republic
Second largest country in South America, after Brazil

Population (July 2004 estimate): 39 million
Literacy: 97 percent
Official language: Spanish
GDP (2003 estimate): $435.5 billion

Sources: Argentina Ministry of Exterior Relations, U.S. CIA World Factbook

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