The national government has made the decision to send a portion of its gold reserves to a European country. This move aims to put the country’s financial assets to work, as they were secure within the Central Bank’s vaults but not generating any returns. President Javier Milei and his Economy Minister, Luis Caputo, revealed this strategy, though it has yet to be confirmed by the Central Bank (BCRA), which oversees these assets. The BCRA will need to respond to a public information request filed by the banking union, La Bancaria.
One significant concern surrounding this decision is the unease it has sparked in the financial system and political spheres regarding the potential for an embargo on these reserves once they leave the country. Memories linger of the 2012 incident when the ARA Libertad was held in Ghana due to a claim from holdout creditors seeking to collect on judicial debts. This historical precedent has raised alarms, highlighting both the risks involved and the implications for national interests.
The ongoing legal situation involving YPF in the United States, and a firm ruling against a holdout fund related to Argentina’s default in 2001, has opened the door for the possibility of seizing Argentine assets globally. Financial analyst and Latam Advisor director, Sebastián Maril, stated that while seizing sovereign assets is complex, it is not impossible.
The government’s recent actions have drawn criticism from certain authoritative figures who believe they have a monopoly on the truth. Professional and critical journalism plays a vital role in democracy, and it often ruffles feathers among those who wish to control narratives.
In a recent public statement, Carlos Maslatón expressed his disapproval of Caputo, specifically regarding the transfer of gold to England, claiming it is “lost forever.” Maril noted that in the last week, the government announced its intention to pre-fund sovereign debt interest payments due in January and the shipment of gold to Europe. The administration aims to demonstrate its capacity and willingness to pay, as well as provide collateral for REPO transactions.
Maril likened the decision to send gold abroad to sending soldiers into battle, pointing out that it places critical assets at the center of potential embargoes related to the ongoing YPF cases and possibly another contentious matter involving GDP-linked bonds.
While Maril stressed that seizing sovereign assets is very difficult, he warned that if creditors were to succeed in embargoing these assets, it could lead to Argentina paying its debts without congressional approval. He emphasized the need for a debtor to protect their assets from creditors. The government’s intentions may be rooted in financial strategy, but the specter of an embargo remains a serious concern.
Sergio Palazzo, Secretary General of the Banking Association and a member of Congress, has filed a request for public information regarding the movement of cash trucks from the Central Bank to Ezeiza Airport on specific dates. The official response from BCRA confirmed that they are working on providing the requested information.
Palazzo pointed out that gold in transit could be subject to seizure if a judge were to issue an embargo order related to Argentina’s foreign legal disputes. He warned of the unnecessary risks being taken and demanded clarity from the government regarding the purpose of the operation, whether it involves currency exchange, a credit operation, or a purchase and repurchase with the Bank for International Settlements.
Financial economists have noted that London poses specific risks for the BCRA’s gold reserves. A source involved previously in negotiations over Argentina’s legal challenges downplayed the likelihood of the gold being seized but acknowledged the possibility of new attempts to circumvent existing legal protections that have so far favored Argentina.
Caputo confirmed the gold’s movement, framing it as a positive strategic decision, suggesting that having gold only sitting in the bank is akin to owning property that cannot be utilized. Instead, moving the gold abroad could yield returns that the country desperately needs.
President Milei elaborated on the broader operation, affirming the preparedness for market re-entry and the steps taken to guarantee payments, reinforcing his confidence that interest rates would drop upon demonstrating solvency.
The absence of transparency from the Central Bank, coupled with Caputo’s role as spokesperson, raises concerns about the government’s relationship with the BCRA and the potential for claims that reserves abroad could be subject to embargo, reminiscent of actions taken post-2001 concerning state properties and the ARA Libertad case in 2012.
The potential risks differ based on where the legal actions are pursued. In the UK, the chances of an embargo are extremely low. In the US, there is a limited possibility recognized by law. Nonetheless, experts warn that creditors may devise new strategies to secure favorable rulings, and the explanations provided by Caputo could pose risks if the BCRA is perceived as not being independent of the executive branch.
Source: https://www.perfil.com/noticias/economia/por-deuda-ypf-pueden-ser-embargadas-reservas-oro-caputo-saco-pais.phtml
