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UPDATE 1-Argentina's Guzman stands by currency controls that have upset markets

(Adds bond price movement)

BUENOS AIRES, Sept 22 (Reuters) - tArgentine Economy Minister Martin Guzman in comments made before Congress on Tuesday stood by the country’s newly adopted currency controls as a way to bolster central bank reserves and help stabilize an economy bludgeoned by the COVID-19 pandemic.

Government bonds have come under pressure this week as investors price in rising risks over the country’s economic recovery following the tightening of capital controls last week.

Argentina seeks policies “that favor the entry of investments for the real economy but that discourage the entry of speculative capital,” Guzman told lawmakers in testimony related to the government’s 2021 budget proposal.

“The macroeconomic transition scheme aims, as one of its objectives, to be able to strengthen international reserves,” Guzman said.

The peso tumbled on the black market last week when the central bank tightened currency controls and restricted already limited access to dollars. The bank limited personal and corporate access to foreign currency in a bid to stem a decline in reserves.

Many commercial banks halted dollar sales entirely as they adapt to the new rules. Over the counter government bonds fell 2.5% on Monday and continued to soften 0.2% on Tuesday.

Argentina’s economy, in recession since 2018, contracted a record 19.1% in the second quarter versus the same period a year earlier.

The steep fall came as the South American country imposed a strict lockdown in mid-March to stem the virus. The country has over 640,000 confirmed COVID-19 cases, and nearly 13,500 deaths. (Reporting by Eliana Raszewski and Walter Bianchi; Writing by Hugh Bronstein; Editing by Christopher Cushing)

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