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It's necessary to get a low interest rate
P gina/12
February 08, 2010

The Economy Minister confirmed that he is continuing to work on completing the debt swap in March and said that if the Supreme Court decides in favor of the government in the conflict over the reserves, they will immediately begin to use the money of the Bicentennial Fund.

by Roberto Navarro

In the middle of the debate for the use of the reserves of the Central Bank for paying public debt, Economy Minister Amado Boudou told Pagina/12 that if the Supreme Court decides in favor of the government in the coming days, he will immediately call a bid for moving debt payments forward. He also said that he is waiting to hold the new swap in March for the bondholders that rejected the invite in 2005. He said, "there is no inflation, but only a reaccommodation of some prices." The minister also said that the dollar's exchange rate won't have brust movements, but it will maintain a parity that "bolsters the competitiveness of the economy."

-Does the decision to use reserves to pay debt mean that the government canceled or postponed its idea to move ahead with the swap, with the IMF and the Paris Club to return to the markets?

-In no way. They are on complementary paths. What is happening here is that people are more enamored with the tools than with the objectives. The debt swap and the return to the international markets and the Bicentennial Fund are all tools. It's not that one can do one thing or the other; one tries to go selecting from its box of tools the most adequate to resolve various problems. We are convinced that in 2010 it's very important that Argentina recover its level of investment, for which the private sector has a primordial role as a job creator. Therefore it's necessary to manage a lowering of interest rates for more investment projects to go forward.

-The Ministry is moving ahead with the swap?

-Yes, absolutely. The Bicentennial Fund is a tool with many facets; on the one hand, it's from an absolute economic rationality, due to applying funds that receive very little retribution - 0.5% annual interest - to pay debts that have interest rates around 10%. Or it's that the cost of the opportunity is very high. And in financial terms it has demonstrated its importance, because when we announced it, the debt swap elevated bond prices.

-Could the new drop in prices delay the swap?

-No. What we are hoping is that when we have the swap ready we will also do it at a time for the best positioning of Argentine bonds, because this also will maximize the level of acceptance.

-Will the swap arrive in March?

-We are intending to do it as fast as possible; we are working with the SEC in the United States as well as in Luxembourg, where we also have begun to inscribe the prospectus, now we are going to do it in Italy. I think that we can do the swap in March. It interests us to do it quickly to dispel uncertainties.

-Are you also continuing to negotiate with the Paris Club?

-It's our intention to do it and go ahead with resolving all of Argentina's problems, but they are not problems that this government generated. It's not true that we are no longer negotiating; it's in the road map that we brought out in July 2007 and which continues on: the participation of Argentina in the G-20, the intent to modify the IMF and the World Bank. We are continuing with these activities, but we have additional tools that we have incorporated, which are not one or the other.

-First you said that the reserve would be used to serve as a guarantee of payment for creditors, then you said they would be used to make payments. What's the final decision?

-If you read the DNU, you can see that it's for paying debt maturities that will come in 2010, both principal and interest. The use of the word "guarantee" was because it assures that those people are going to perceive their resources. And what are we thinking of using the Bicentennial Fund for? First, in every moment that debt comes due it is going be the money from the Fund that pays it; but also it's our intention to make bids for paying in an anticipated form and to get discounts for those payments.

-You're not going to intend to go out to the markets?

-Yes, but it's not a priority issue for the Treasury. The issue of making an emission has to do with marking the reference rate for the private sector and also for the provinces. To us it doesn't make any sense and even less for the governors that have to emit debt for around 10%. We want to lower the interest rate by a digit and that it be a lead for the governors.

-It's not a priority to return to the markets, despite the low international rate?

-We are going to use all the sources we have available: that's the Bicentennial Fund, it's the public intra-sector sources and it's also the sources having to do with access to the capital markets, but it's not the main goal.

-The decree speaks of the freely-available reserves and many think that the government is going to use US$17 billion and not US$6.5 billion. What's the intention?

-I think that's chicanery. In part, it's a recognition from the most orthodox sectors that there is US$17 billion in excess reserves, but the Bicentennial Fund is US$6.569 billion and we are not going to touch one dollar more.

-If the Supreme Court rules in favor of the position of the government before Congress comes into session, could the Fund begin functioning and will you begin using the money?

-Clearly. Without a doubt.

-The other complaint from the opposition posits that the use of this reserve money frees up parts of the budget that were not destined toward debt payment and in reality you will be using money for other things without running them past Congress.

-In reality no, because the budget has in it what is known as a bond-gap, the result of non-primary financing, but financing and one for financing it having different sources, this is an additional source.

-What did you form the new Council for, which is made up together with the president of the Central Bank?

-There are countries, like Chile and Brazil, that have this kind of organization for precisely the monetary authority, which has to be independent in its issues of exclusive incumbency and in issues of instruments, it doesn't have to be autistic. That an organization has operative independence doesn't mean that it can go against the policies decided by the Executive Branch. This is the sense of the Council: it's an arena in which we can talk, discuss, interpret and bolster the policies of the BCRA with respect to the needs of the Executive Branch.

-What is changing with the arrival of Mercedes Marco del Point?

-Her designation to lead the BCRA is an important move for Argentina, which has to do with all of the many policies that we are bringing forward from the government; it's not an isolated fact that a person like Mercedes Marco del Pont, who beyond her role as an economist, has clearly marked her vision of the economy, is running the BCRA. It seems to me that it's very good in relation to all that there is to do this year to improve access to credit and for our being able to enter a process of investment as much in the private sector as the public sector.

-What happened with Blejer?

-A lot of things happened this month, politicians appeared that one never thought would take a position like the one they've taken, defending the independence of the Central Bank before the interests of the country. The dynamic of the events made the President parse her decision to the new situation.

-Are changes coming to get the financial sector to dedicate itself more to the productive sector?

-I think that it's key to find mechanisms of incentives that allow the financial sector to orient itself to make investments in the long term and raise fiscal capital in Argentina, there have to be businesses that generate more jobs; and also to improve the access to consumer credit, but they are not things that you pull off from one day to the next. We remember that the national financial system was destroyed and it needed a profound rescue and now it has to be strengthened.

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