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Dark clouds over the swap and the finance plan
El Cronista
January 07, 2010

Analysts say that holders of debt will now have greater uncertainty. For some, the institutional "noise" could complicate the economy

PABLO FERNANDEZ BLANCO and DOLORES OLVEIRA Buenos Aires

The disputes between the government and the Central Bank and the request for the resignation of Martin Redrado over the use of reserves to guarantee payment of public debt, brought an almost unanimous view among economists. Almost all the specialists consulted by El Cronista agree: the interference of the Casa Rosada in the issues of the BCRA plays against institutional stability and "throws mud" on the face of the swap of the debt in default, which Economy Minister Amado Boudou has planned to launch at the end of the month.

Also, it's bad news for the bondholders, who up until the conflict were counting on the Bicentennial Fund as a guarantee for collecting on their Argentine public bonds.

"By all lights the debt swap should be successful. But with these things today it's beginning to get difficult," explained Aldo Abram. And he said that the request for the resignation of Redrado "clearly marks a contradiction between the goals the Boudou put forth, to restore credibility, and the fiscal needs by the government to sustain excessive levels of spending."

For his part, Daniel Artana, of Fiel, said today that "yes, I'm a bondholder, today (meaning yesterday) I am not happy. On all that they have to pay me, I don't care where the money comes from. The Bicentennial fund made them easier, at least for maturities in 2010."

Economists also say that the institutional "noise" that is provoking the fight between the head of the Central Bank and the government even cuts against general growth and activity in 2010. "It's a bad sign, because there is uncertainty. Also, it's believed that whatever scheme to solve it is complex to pull off for the financial and economic system in general, now if it is that Redrado is holding on or if some recourse moves ahead in Congress," said Ricardo Delgado, of Analytica.

In that direction, recent history points to an unforgettable date: in 2001, and by the then-head of the BCRA, Pedro Pou, resisted his removal by the government of Fernando de La R a, and his replacement took two months. "To have a situation of uncertainty in monetary and exchange-rate terms is not going to be a free ride. This could interfere with the process of growth for the year," said the economist. As for the impact on the swap, Delgado argues that "today investors are asking if there are funds to pay them or not."

About if Redrado should remain in his position or not, there are different opinions among economists. Eduardo Curia, for example, said that "in the middle of a similar struggle, his remaining is complex, like that of Vice President Julio Cobos, but in the neuralgic place of the operation. It seems to me he should go."

Abram, in turn, said he should stay. "If he resigns, he's failing on his commitment that he made when he took his oath to comply with the charter of the entity," he said.

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