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Reviewing the payment with reserves for fear of an embargo
La Nacion
January 11, 2010

To avoid creditor action, the government won't constitute the US$6.5 billion fund

Carlos Pagni
LA NACION

When the judiciary and Congress resolve the legality of the Bicentennial Fund, it's likely that this problematic creature will have already been turned into a footnote. Or that it will be something else. In the last 48 hours, Cristina Kirchner was convinced that international creditors could embargo the reserves of the Central Bank destined for that coffer.

According to what La Nacion could find out from high sources at the BCRA and in the government, the Economy Ministry is studying more secure alternatives to finance the gigantic public spending. Until last night the idea prevailed that, whoever is its president, the Central Bank will not deposit in an account of the ministry the US$6.5 billion put forth in the decree of necessity and urgency (DNU) no. 2010.

This change allowed yesterday for government block and opposition members to explor a timid parliamentary accord. The most solicitous were the Radicals: there had already been a telephone conversation between the head of the UCR block in the House, Oscar Aguad, and the Speaker of the lower House, Eduardo Fellner (of the FpV) in which they spoke of the possibility of approving the DNU under two conditions: that it only constitutes a guarantee fund and would not commit reserves to increase current account spending. However, sources in the government block in Congress clarified: "We can't trust too much in the UCR because they face a veto fro Elisa Carri . Also, an understanding will have to include the Casa Rosada, and we already know that there that 'accord' is a bad word."

Mario Brodersohn, very influential among the Radicals, proposes that, instead of creating a fund, the BCRA go ahead with transferring to the Treasury, through Letters, the remaining dollars from the trade surplus. They would be, by his calculations, a billion dollars a month. The reserves level, in this case, would remain intact. Radical ex-deputy Ra l Baglini, lead advisor to Julio Cobos, was studying a similar proceeding yesterday. Brodersohn and Baglini have an old friendship with the vice president of the Central Bank, Miguel Pesce, a Radical with Mendozo origins who joined the government with the Vice President. If the courts confirm the ouster of Redrado, Pesce would return to lead the bank. The candidacy of Mario Blejer has weakened along with his patron, Amado Boudou.

Pesce and the board members in his column are studying a mechanism to move the reserves as maturities come due. The biggest ones will be in August. Until then, maybe they'll adopt other proceedings, as suggested by the UCR.

The President appears to have admitted the risks of paying current debts with reserves. Kirchner they explained paid the International Monetary Fund with that kind of resources because the Fund had loaned to the Central Bank, not to the Treasury. As such, the Treasury's creditors like the holdouts couldn't complain of being discriminated against. In turn, she plans to pay the Treasury's debts. It's possible, then, that Judge Thomas Griesa would order that this money go to the unpaid bondholders. The New York firm of Sullivan & Cromwell, hired by the Economy Ministry, had already warned of this danger.

Various Kirchnerists yesterday began in a sort of hangover, the evaluation of the damage done by the hurricane that they themselves had undone. A very influential member of the House joked: "Maybe we should review the way we make decisions. There would be simpler ways to fire the Central Bank president than with an institutional crisis."

Judicial definition

Today there will be new developments in the judicial arena. At 7:30am, the House members that, led by Federico Pinedo, ran after the contentious administrative route to head off the Central Bank from delivering the reserves to the Treasury will ask Judge Mar a Jos Sarmiento to convert the preventive ruling into a final one. If Dr. Sarmiento agrees to this request, the effort loses speed. As a consequence, they appeal from the Executive Branch could arrive at the Court of Appeals next week. Many observers presume that, with the composition that this court has had up to now there will be judges Marta Herrera and Clara Do Pico, of renown impartiality, the government will fund greater difficulties validating its measure.

Government attorneys trust that the appeals court will revoke Sarmiento's ruling with the argument that the House cannot legitimately litigate in matters of legislative jurisdiction.

"If they want to annul the decree, they have to do it in Congress," an official said yesterday. However, Judge Sarmiento found that this parliamentary capacity was limited because the Casa Rosada tried to apply the DNU without complying with constitutional terms (she cited, in favor of the House the cases of Nievas and Alimena.)

The same lawyers admit having fewer arguments on the DNU than on the removal of Redrado. "Those advising the president," said one of them, "were mistaken. They should have consulted the Congressional commission as set out in the Charter and, after, fired him anyway. Overall, the counsel of that commission isn't binding." To skip this step, the president escaped a bad moment with the opposition. On May 17, 2005, the ARI block in Congress asked to activate this proceeding to depose Redrado for "failure of moral solvency." By then the case was open on the presumed diversion of funds when Redrado led the National Stock Market Commission (1991-1993). The Kirchner block rejected the request. It would be curious that they'd asked for his removal when they'd defended his remaining now.

Messages to Lorenzetti

As this controversy is already in the court, pro-government judicial operators sent unfriendly messages in the past few hours to Ricardo Lorenzetti, president of the Supreme Court. They reproached him for hurrying the procedures on the filing by San Luis and dismissing the head of the accounting experts of the court just when it was known of the throwing out of the case by Judge Norberto Oyarbide on the patrimonial enrichment of the Kirchners. They made note of those attitudes put into play by the statements of Deputy Daniel Katz, who alleged that Lorenzetti was a possible vice presidential candidate with Julio Cobos. Lorenzetti rejected all of the reproaches. But it's possible that the high court is taking some time before resolving the Central Bank controversy.

Another false conspirator, which Olivos should have to strike from its black list, is Cobos. The Kirchners are furious with him because he convened for this afternoon the Parliamentary Work Committee to analyze in the Senate the crisis on the reserves and the presidential DNUs.

"He plans to create an atmosphere like in 2001, with [Ram n] Puerta pressuring [Fernando] De la R a", roared an unconditional House supporter of the President, while pretending to ignore what side the Santa Cruz deputies were on during that riotous story.

When investigated in the Cobos circle, the accusation appears to be part of a misunderstanding. An intimate of the Vice President told LA NACION yesterday: "Julio was on vacation in Chile. He didn't tell me if he'd spoken to Redrado. But if he did, it was to say to him that he had to channel everything in the institutional manner. It was not at all in defense of the President (Cristina). It's in his own defense. It doesn't sit well with him if tomorrow it comes from the government that every DNU turns into a lawsuit raised by the opposition. For that he wants everything to go back to Congress."

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