Argentina, Wall Street banks in talks on financing line

BUENOS AIRES: Argentina’s new government is negotiating with a group of Wall Street banks for a credit line worth up to $7 billion to bolster its low foreign reserves and help it eventually lift capital controls, a banking source said on Friday.

President Mauricio Macri, who took office on Thursday, wants to move quickly to remove currency controls that restrict access to US dollars but is stymied by the central bank’s precariously low hard currency reserves.

The commercial banking source said Argentina was in talks with HSBC, JPMorgan Chase & Co, Goldman Sachs, Deutsche Bank and Citigroup Inc. But he said there remained obstacles to an agreement and that no immediate deal was likely. “The banks are working on a deal.

It would be difficult for anything to come about immediately. There are some key details needed to close this out that are missing,” said the source, without giving more details. A finance ministry spokeswoman confirmed Finance Secretary Luis Caputo had met with banks in New York earlier this week and that the government was happy with the talks so far.

Finance Minister Alfonso Prat-Gay declined to give details. “We’re negotiating different financing options so that the dollars that should never have left the country come back as quickly as possible,” Prat-Gay told reporters after unveiling his team. The previous government eased the reserves shortage in part by negotiating an $11 billion currency swap with China.

Prat-Gay said expected to start talks with China, “which will include a possible re-opening of that swap line.” A second source in the central bank confirmed the talks were taking place but could not confirm the amount being discussed. Argentina’s daily La Nacion reported that beyond the possible $7 billion being sought via the group of five banks, a further $1 billion could be secured through a financing agreement with Spanish banks Banco Santander and BBVA Bancomer.

“They’re working to lower Argentina’s credit risk given the fact that it is in default and keeping in mind the new government is working to resolve that situation,” the commercial bank source said.

Citi and Goldman Sachs declined to comment. Argentina will ease currency controls under Macri, but not until the true amount of central bank reserves is known and its board of directors has been replaced, a senior incoming bank official told Reuters earlier on Friday.

Argentina’s central bank counts its total reserves at $25 billion, but some private economists estimate net reserves are a fraction of that. “We will (ease controls) when we are sure it’s the right moment. We will do it as soon as possible and as calmly as possible,” Prat-Gay told reporters.

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