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Refloating the idea of paying the Paris Club with reserves
Clarin
July 23, 2010

The "extra spending" could be included in the 2011 Budget. They would therefore avoid the IMF.

by Candelaria De La Sota

In the government they prefer not to speak of the issue, precisely because less than two years ago Cristina Kirchner made an announcement with pomp and circumstance that the international crisis then obliged her not to comply with. But there are officials that admit that they are looking at the possibility of refloating the idea of using Central Bank reserves to pay off the debt with the Paris Club, a balance that rounds out to US$6.7 billion.

"The debt swap is close, the Paris Club is the next milestone, and to resolve it would be putting the final point on the default," said official sources. And they said that the International Monetary Fund (IMF) continues to appear as one of the main impediments at the time of negotiating with the countries that make up the Paris Club.

That is where the idea appears that has some officials copying the gesture of "economic sovereignty" that Nestor Kirchner made when he paid off the entire debt with the IMF itself. "If we make a cash payment to the Paris Club, they couldn't demand that the Fund be any part of any negotiation," they argued.

Encouraged with the growth of the Central Bank reserves in which this month have already risen more than US$1.5 billion and are approaching US$51 billion they say that they could repeat the scheme of the Fund for Dis-indebtedness and stick their hands into the Central Bank's dollars which form part of the "freely available" reserves.

The excuse is that, while they think there is no hurry to close the Paris Club chapter, it's certain that those in government are concerned over the trade obstacles that are generated by the Paris Club situation. "That blocks many investments in strategic areas for the government, like energy and transportation," an official who asked not to be identified confessed. This refers to when businesses can get financing for their productive projects, they can't then get the necessary international backing because of the default with the Paris Club.

Now that the worst of the crisis appears to have fallen into the past, and after having closed the debt swap, the government is seeking to return to this idea. What they want is to give greater legal force to Decree 1394-2008 for it to have the weight of law.

Maybe the answer would be to include the creation of the new fund in the 2011 Budget.

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