* Judge blocks government from using reserves to pay debt
* Argentine president says she will go ahead with plan
* Gov"t appeals amid legal, political wrangling
* Bond spreads tighten on push to repay debt-analyst (Adds govt appeal, constitutional lawyer, market reaction)
By Kevin Gray and Helen Popper
BUENOS AIRES, March 4 (Reuters) - Argentina"s presidentdefiantly vowed on Thursday to tap billions of dollars inforeign currency reserves to pay debt and appealed a courtorder blocking her latest attempt to use the funds.
Two days after Fernandez signed a new decree to transfersome $4.4 billion in reserves to the Treasury, a federal judgeissued a ruling that ordered the Economy Ministry not to usethe money "in any way" until Congress reviews the decree.
The ruling was a setback in her drive to use the country"ssavings to help pay some $15 billion in debt coming due thisyear. But debt markets cheered her determination to repay debtat a time when the cash-strapped government is trying torestructure $20 billion in defaulted bonds and return tointernational debt markets.
"I"m convinced I"m acting within the limits of theConstitution," she said in a televised national address. "Thispresident wants to, and will, pay debts with central bankreserves."
Argentine sovereign bonds outperformed the JP MorganEmerging Markets Bond Index Plus 11EMJ, tightening sevenbasis points to 768 over U.S. Treasuries while the indextightened two basis points to 283.
"Everybody was listening to the president"s speech and shemade it very clear that the government wants to pay," one NewYork-based sovereign analyst said. "Argentina had beenunderperforming the market for a while and what we are seeingtoday could also be a technical rebound."
Locally-traded Argentine bonds <AR/BONOS> pared lossesafter Fernandez pledged to meet debt obligations. The bondswere down 0.3 percent on average in afternoon trade.
Fernandez this week revived her plan to tap some $6.6billion of foreign reserves, stoking political tensions andraising prospects that the newly appointed central bankpresident, a government ally, may be ousted by Congress. Formore see [ID:nN04227667].
The battle over Fernandez"s plan has heightened investorconcerns over political uncertainty in Latin America"s No. 3economy. It also has prompted questions over whether theplanned swap of $20 billion in defaulted debt will moveforward.
"This (court ruling) is another embarrassing developmentfor the government," said Alberto Ramos, a senior economist atGoldman Sachs in New York.
DEBT REPAYMENT FUND
Fernandez issued a decree in December setting aside morethan $6 billion in reserves to guarantee debt payments thisyear, aiming to lower the country"s costs of issuing new debt.
She fired former Central Bank President Martin Redrado forrefusing to hand over the money and the reserves decree wasblocked by a court after opposition lawmakers challenged it.
Fernandez annulled the decree on Monday and replaced itwith two new ones that ordered the transfer of $4.4 billion forprivate creditors and $2.2 billion to pay multilateral lenders.The Central Bank immediately handed over the larger amount.
Economy Minister Amado Boudou said the government plannedto make at least $100 million in debt payments this week, butit was not immediately clear how much had already been paid.
Some analysts suggested she might try to use the moneydespite the new injunction, but constitutional lawyer GregorioBadeni played down that possibility.
"If the president goes ahead, it could be a crime becauseshe would be going against a judicial order," said Badeni, whorepresented Redrado.
In Fernandez"s speech she criticized judges and saidopposition to her plan amounted to an attempt to bring down thegovernment.
"What stands out is the lack of respect of the law," saidJuan Diedrichs, an analyst at Capital Markets Argentina."That"s the most serious thing."
Fernandez insisted that the government has the right to usethe reserves.
"This isn"t the Central Bank of Namibia or Uganda. This isthe central bank of the Republic of Argentina," she said.
Her new decrees to tap reserves, seen by some analysts as astrategy to boost government spending ahead of next year"spresidential elections, drew protest from the opposition, whicheffectively took control of Congress this week.
A Senate committee voted to reject the president"sappointment of Central Bank President Mercedes Marco del Pont,who is widely seen as a close to Fernandez and still needsSenate confirmation.
Her appointment is expected to be put to a vote in theSenate next week. (Additional reporting by Jorge Otaola, Guido Nejamkis, WalterBrandimarte, Juliana Castilla and Hugh Bronstein)
Currencies Bonds
No comments:
Post a Comment