MercoPress. South Atlantic News Agency

Argentine government lacks Senate support to tap Central bank reserves

Senator Miguel Pichetto

Argentina’s government lacks the support needed in the Senate to approve President Cristina Fernandez de Kirchner’s plan to tap 6.6 billion US dollars in Central Bank reserves to pay sovereign debt due this year, ruling party Senator Miguel Pichetto admitted on Sunday.

“We have to keep talking” Pichetto told the Buenos Aires media in a barrage of radio interviews. “I’m still optimistic. The numbers aren’t decided.”

Fernandez’s December 14 (“necessity and urgency”) decree calling for a portion of the central bank’s 48 billion USD in reserves to be used needs support from some opposition members to pass in at least one chamber of Congress.

Former central bank President Martin Perez Redrado was fired last month for not supporting the plan.

Pichetto, said approval of the plan would help lower national and provincial interest rates on any new debt. Going into international markets for the money would result in interest payments of as much as 16%, compared with 0.5% from the central bank, argued Pichetto.

“It would be absurd not to move forward on this proposal,” Pichetto said. “This has to do with reducing the country’s outstanding debt.”

Perez Redrado’s opposition to Mrs. Kirchner’s decree prompted her, after a long judicial and congressional battle to replace him with Mercedes Marco del Pont, the head of state- owned Banco de la Nacion Argentina which acts as a development bank.

She is known to openly support making use of central bank reserves and admits the bank should be administratively autonomous but not autarchic from the Executive and economic development policies.

The latest vote count in the Senate (72 seats) shows the opposition with the necessary 37 votes to block the request and the government with 35. However the administration of Mrs. Kirchner believes there are two votes that could be persuaded. In the event of a tie the Vice President Julio Cobos casts the deciding vote.

The Kirchner government is collecting support among governors whose provinces are in the red or short of cash, and accordingly would benefit from the Bicentennial Fund by having access to relatively cheap credit. Governors are supposed to press on the three Senators to rethink about provincial finances.

A vote on the issue is planned for next February 24.