BUENOS AIRES, Argentina (AP) – A law designed to restructure Argentina’s debt and sidestep a US court ruling that pushed the government into default could be difficult to apply and worsen the country’s frail economy, analysts say.
Argentina’s congress approved the bill early Thursday and President Cristina Fernandez formally enacted it later in the day, calling it a “historic event.” The law would let Argentina pay bondholders locally to skirt the US financial system, which is bound by a US court order restricting the South American country’s repayments. The measure also allows creditors abroad to exchange their bonds for new ones not bound by US rules, and it encourages investors to move their Argentine debt from the US to Argentina or France through a debt swap.
The law was backed by governing party lawmakers, but criticised by the opposition and several economic analysts. “This law will have many difficulties in being applied effectively,” said Matias Carugati of the Buenos Aires-based Management & Fit consultancy. “It will be up to the bondholders, who will have to change the jurisdiction of their debt from the US to Argentina or France.” Dante Sica, of the consultancy abeceb.com, said it will be difficult for some bondholders to act under part of the law that lets a unit of Argentina’s Banco Nacion replace the Bank of New York Mellon as the agent for payments.