BUENOS AIRES (Reuters) - A bill aimed at stopping Argentina’s economic decline by ending its 14-year banishment from the global bond market passed its first legislative hurdle on Tuesday, when a Congressional committee sent the measure to the full house of representatives.
President Mauricio Macri, elected in November on a free-markets platform, wants Congress to approve a deal to pay $4.6 billion in cash to the biggest holders of defaulted debt.
The pact is the cornerstone of his plan for attracting investment to an economy battered by heavy currency controls under the previous government. Access to financing would help Macri close a wide fiscal deficit without the kind of harsh budget cuts that have gotten other leaders thrown out of office.
If he gets it right, Argentina could become a bright spot in the generally troubled emerging markets asset class.
The full house will debate the proposal next week. If approved there, it would go to the Senate.
The bill was amended by the committee to say money raised by issuing sovereign bonds would go only to bondholders suing the country over its 2002 default. Additional borrowing would be capped by limits written into the national budget.
The government said it plans three international debt sales next month, if Congress approves the pact.
Lawmakers are being asked to repeal two laws blocking settlement of the debt case. The New York judge hearing the case said the laws must be scrapped for the deal to take effect.
Most holders of Argentine bonds accepted about 30 cents on the dollar in the country’s 2005 and 2010 debt restructurings. A small group of New York hedge funds held out for better terms and sued in the U.S. courts.
Macri’s predecessor Cristina Fernandez refused to talk with the holdout creditors, who she and her allies characterize as vultures out for astronomical returns on bonds they bought at steep discounts after 2002 crisis.
“We have to resolve the case brought by the vultures, but under fair conditions,” said house member Axel Kicillof, who served as Fernandez’s economy minister.
Macri is expected to cobble together the votes he needs in the house. He is enlisting provincial governors to convince their respective Senators to pass the pact.
The governors want the nation’s credit to be re-established so they can finance the repair of crumbling road and train systems needed to haul cash crops like soy and corn to port.
Additional reporting by Maximiliano Rizzi