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CFK defends debt repayment fund
Buenos Aires Herald
January 12, 2010

Amid the deepening political uproar following the sacking of Central Bank President Mart n Redrado over the dispute to use foreign reserves to pay debt, President Cristina Fern ndez de Kirchner defended the government plan yesterday saying it is vital to the country's drive to return to global credit markets and denounced a political manoeuvre of the opposition and the media "with help from some sectors of the judiciary" against the Bicentenary Fund.

"Argentina needs to exit default status imperatively so companies can get cheaper financing in the world," said Fern ndez de Kirchner.

Fern ndez fired Redrado last week after he opposed her plan to use 6.57 billion dollars in reserves to service the public debt, although a judge reinstated Redrado a day later and blocked the transfer of the funds to the Treasury.

"We might not be nice people or have the best temper in the world, but when it comes to defending the interests of the Argentine people, we will not give in, not even under water," said the President, who said the Bicentenary Fund was "created to guarantee the payment of debt with our reserves."

In line with the statements made by her husband former president and Deputy N stor Kirchner during the weekend, the President denounced an alleged conspiracy against the government in which she included "parts of the judiciary."

During a ceremony to announce a series of measures for the farm sector, which was attended by Argentine Rural Confederation (CRA) head Mario Llamb as, Fern ndez de Kirchner claimed "there is a vast political and media manoeuvre with the help of some sectors of the judiciary" to avoid sidelining Redrado and transferring foreign reserves to the Bicentenary Fund.

The turmoil has rattled financial markets and highlighted political instability in the country just as Fern ndez's cash-strapped government seeks to woo investors to be able to sell bonds for the first time since a massive debt default eight years ago.

"It's vital that Argentina return to the capital markets, not paying 15 percent or 16 percent, but reasonable rates," said Fern ndez de Kirchner, who has accused opposition leaders of blocking her plan to make it harder for her to govern.

The turmoil at Central Bank comes during the run-up to the planned launch of a debt swap later this month with holders of some 20 billion dollars in defaulted bonds. The swap is meant to pave the way for a bond issue to ease tight state finances.

Fern ndez said using part of the Central Bank's 48 billion dollars in foreign reserves to service this year's debt obligations of 13 billion dollars would help ensure the success of the debt swap.

The fund is helping Argentina's "bond prices improve, which will help us have a successful swap," Fern ndez said, adding the swap would in turn help lower the nation's borrowing costs.

However, heightened political uncertainty over the reserves dispute has hit Argentine financial markets, driving down bond prices, which had rallied for several months.

Argentine stocks fell in thin, cautious trading while locally traded sovereign bonds ended almost flat as some investors looked for bargains after last week's losses although many leading bonds fell. The peso closed slightly firmer against the US dollar.

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