(Adds approval of bill by Senate committee)
By Alejandro Lifschitz
BUENOS AIRES Aug 27 Argentina's government on
Wednesday ruled out further piecemeal debt talks with a small
group of U.S. hedge funds and said it needed to strike a single
deal with all bondholders that have rejected past restructuring
Latin America's No. 3 economy fell into default again last
month after failing to reach an agreement with a group of
holdout funds led by NML Capital Ltd and Aurelius Capital
Management, which are suing for full payment on their bonds.
Other funds that have also rejected bond swaps that followed
Argentina's record default in 2002 lurk on the sidelines and
could launch similar lawsuits.
"We have to negotiate with everyone," Economy Minister Axel
Kicillof told a group of congressional committees on Wednesday.
A deal is now not seen likely before next year's October
presidential election, in which Fernandez cannot run.
Analysts say the dearth of dollars flowing into Argentina's
economy will stretch already-sapped foreign reserves and
intensify pressure on a peso that has been hitting one record
low after another.
The local currency shed 1.5 percent on the black market on
Wednesday to plumb an all-time low of 14.400 as central
bank reserves fell to $28.5 billion.
On Wednesday, Congress began debating a bill designed to
sidestep a U.S. court ruling banning Argentina from servicing
performing debt until it pays the litigating funds $1.3 billion
"The main aim of the draft bill is to show that Argentina
can pay its debt and wants to pay its debt," senior government
official Carlos Zannini told the hearing.
After a spirited debate in which opposition senators
criticized the government's handling of the debt situation, the
bill was approved by committee and sent to the Senate plenary
for a vote expected next Wednesday.
SCANT HOPE FOR DEAL
Kicillof's comments poured cold water on already dim hopes
the government might resume talks with NML and Aurelius in early
2015 following the expiration of a legal clause preventing
Argentina from paying holdout investors on better terms than
those obtained by investors that accepted restructuring
agreements in 2005 and 2010.
Investor optimism for a deal suffered a blow last week when
President Cristina Fernandez announced plans to make debt
payments locally and to push bondholders to bring their debt
under Argentine law.
Zannini said the long-term plan was to bring all of
Argentina's sovereign debt under Argentine law.
Erratic policymaking, which saw interest rates cut last week
and then raised this week, has highlighted tensions between the
pro-expansion Kicillof and the country's central bank, which is
presiding over one of the world's highest inflation rates.
"It is unclear that they are ready to make the adjustments
needed to meaningfully control fx pressures," said Daniel
Kerner, director of Latin America at Eurasia Group.
Fernandez's stance against funds that she denounces as
"vultures" has won wide support among Argentines, but a second
national strike scheduled on Thursday underscores a growing risk
of social unrest.
(Additional reporting and writing by Richard Lough and Hugh
Bronstein; Editing by Chizu Nomiyama, Jonathan Oatis and Leslie