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Bicentennial Fund: Boudou could not open account at BCRA
Clarin
January 04, 2010

Doubts at the entity led by Martin Redrado. Controversy grows.

by Ismael Berm dez

Until now, the Economy Ministry could not open the account at the Central Bank that was authorized to place the reserve dollars fo payment of government debts this year. And this despite that on December 22nd, and based on the DNU signed by Cristina Fern dez de Kirchner, Economy Minister Amado Boudou signed Resolution N 419 that set out two measures: emit a Treasury Letter for US$6.569 billion with a 10 year maturity (December 22, 2019) to be subscribed to by the Central Bank, and authorizing the Hacienda Secretary to open an account at the Central Bank under the name of the Bicentennial Fund, with two sub-accounts: one to pay the maturities with multilateral organizations (like the World Bank and IDB) for US$2.187 billion and another to pay maturities to private creditors for US$4.382 billion.

For the Central Bank, to apply the resolution would be a mere book entry because in return for receiving the Letter, the Central Bank would have to open an account in Hacienda's favor. The operation wouldn't mean at the moment the exit of one single dollar of the Central Bank's reserves, but would allow Boudou to demand all the dollars in the account at any time.

What's real is that until now, and despite the meeting of the board of the Central Bank last Wednesday, the Hacienda Secretary has not been able to move ahead with opening the account simply because the men running the Central Bank did not approve the subscription to the Letter that Boudou emitted. The delay is due to the fact that the entity Redrado runs is not convinced either of the legitimacy nor the convenience of paying debts totaling US$6.569 billion with reserves, which could almost triple in total if the government requires it. The Central Bank's arguments are various.

Legal: The decision was based on a DNU and not on a new law. And various Congressional blocks oppose the measure, which opens the possibility that the DNU would not be approved by or could be rejected by Congress. Also, there are court filings that implicate not only the government but also the board of the Central Bank.

Limits: While the Executive is demanding US$6.569 billion, the the concept of excess reserves included in the DNU is an accounting trick that today could add up to some US$15 billion. The fear at the Central Bank is that the day after by a new resolution, Economy could make another request and demand more dollars.

Destination: the DNU allows the government to spend it on any kind of expense and debt, both external as well as internal ones contracted by foreign currency or pesos. Thus it alters the National Budget, the monetary policy, the level of public spending and even the exchange rate policy that already obliges the Central Bank to rebuild the reserves, increasing its future demand in foreign currency.

Judicial: the DNU encourages pressure from the vulture funds to embargo reserves because the government considers them an "excess savings" and not the backing of Central Bank assets.

Papering-over: The government already used US$9.530 billion in reserves that paid off the IMF and another US$2.6 billion in Special Drawing Rights of the IMF to pay the GDP coupon. They also have borrowed more than US$8 billion from the Central Bank in "Transitory Advances" and almost US$6 billion in public bonds. In total some US$26 billion.

Fund: While it carries the name of the Bicentennial Fund it's seen as an account to pay debts. But there exists a fear that it constitutes a precedent to form a sovereign investment fund that is not favored by the people at the BCRA.

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