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Uncertainty and complaints from the U.S. bondholders
La Nacion
January 11, 2010

"It can't be that they take reserves for what happens to them," they said

Silvia Pisani
US Correspondent

WASHINGTON.- Despite Minister Amado Boudou asking to "lower the tone" over the dispute over the attempt to remove the president of the Central Bank, the confluct is already affecting his announced offer of a deal to the bondholders in default, for whom it's impossible to close any arrangement without first knowing who is going to run the entity, with that authority and how the use of the reserves will play in payment of the debt.

Thus it unfolded from interviews by LA NACION with operators on the U.S. market, which will be one of the determinants at the time of defining the success or failure of the new offer tabled by the minister. And the consequential impact that the result of that announced operation has on the perception of risk to make investments in the country.

At the start of the week, none of these questions with what authority are the reserves used and how it will be affected seem clear among analysts and local operators. Added to the uncertainty generated by the institutional crisis, the attempt by Boudou to use reserves to pay debt in place of taking, for that, money loaned at a more expensive interest rate seemed to roughen the edges here.

"It can't be that the Argentine authorities have protected so much of the reserves in Switzerland and that they only take them out for what is happening to them. Almost all the countries only have between two and three percent of their reserves under that regime, while Argentina has much more," said Robert Shapiro, the head of Argentina Task Force, the association of holders of debt that got the backing of the State Department.

In interview with LA NACION, his complaint pointed to a similar direction as local expers that think that the outcome of Argentine using reserves to comply with debt holders with whom they arrive at an accord for partial payment opens the door for others those suing for every penny of payment to ask for embargoes on that same money before international courts.

Others spoke of the loss of confidence. "After all that has happened, who could negotiate in good faith" with the minister, asked an economist accustomed to dealing with international financial organizations.

Local sources predicted here that Argentina's institutional crisis will translate, among other things, into a larger difficulty at the time of seeking necessary technical backing in local organizations to launch the new debt swap. Among them, the Securities and Exchange Comission (SEC), the local authority for the stock market that must rule on the character of the new proposal.

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