Did Nestor Kirchner get the upper hand?

The payment was made a day after the government agreed a new deal with the International Monetary Fund, under which Argentina will pay only interest on more than $21bn of loans for the next three years.

The deal with the IMF has come after weeks of haggling over the conditions of the deal.

The agreement to allow Argentina to rollover its debts was designed to allow the country to concentrate on recovery after its worst economic crisis.

But critics are already saying the terms of the agreement are too lenient to spur growth.

Banking fears

"We would be concerned that this programme would not provide sufficient bases for restoring sustainable growth in the Argentine economy and restoring their access to global capital markets," said Charles Dallara, managing director of the Institute of International Finance.

The IMF was originally insisting that Argentina agree to compensate the big banks for their losses following the 2001 devaluation.

But there was no mention of compensation for the banks in the final Argentine-IMF agreement, worrying foreign investors.

"An economy is not going to thrive without a healthy, functioning banking system," warned Mr Dallara.

Applause

Analysts say the Argentine government gained the upper hand after the weeks of negotiations.

The deal has helped President Nestor Kirchner to regain political support.

Argentine newspapers applauded the deal.

"Argentina has avoided... dropping off the face of the earth," wrote columnist Joaquin Morales Sola in the daily La Nacion.

"He [Nestor Kirchner] has swept away any doubts about his first year," wrote Eduardo van der Kooy, in an analysis piece for the local newspaper Clarin.