July 11, 2012 / 7:51 PM / 7 years ago

Cash-strapped Argentina province says it will pay debts on time

* Buenos Aires official says payments to be made on time

* Debt yields have jumped as financing doubts increase

* Cordoba province to issue $50 mln in one-year note

By Alejandro Lifschitz

BUENOS AIRES, July 11 (Reuters) - Argentina’s largest province will pay its debts as usual this year despite tight finances that have prompted belt-tightening measures and delayed a bonus for public workers, a provincial official said on Wednesday.

“Payments are guaranteed to be made properly, on time and in line with usual procedures,” provincial Economy Minister Silvina Batakis told Reuters.

The financing crunch in Buenos Aires province, which accounts for more than a third of Argentina’s gross domestic product, has raised concerns about its ability to pay its debt, pushing yields up to near-record levels.

The province faces debt obligations of about $395 million on dollar- and euro-denominated bonds during the rest of the year, according to data released in December.

Buenos Aires’ dollar-denominated euro bond due in 2015 yielded 26.6 percent on Wednesday, almost 1.1 percent over this year’s lows, reached in early May, according to Reuters data. Higher yields reflect the perception of increased risk of default.

Center-left President Cristina Fernandez has only partially heeded to appeals for financial aid from provincial Governor Daniel Scioli, a former ally of the president and possible 2015 presidential candidate.

Like Fernandez, Scioli is a member of the fragmented Peronist movement that has dominated Argentine politics for 70 years, but he is favored by Wall Street investors and disliked by her allies who view him as too far to the right.

Argentina’s constitution limits presidents to two consecutive terms, meaning Fernandez could run again only if she sought to amend it. Scioli has said he would like to stand if she did not seek a third term.

Fernandez has suggested the shortfall in Buenos Aires was due to Scioli’s “mismanagement,” though many other provinces are also facing spiraling deficits.

The province of Cordoba, which is also struggling to pay wages and pensions on time, said this week it would offer up to $50 million in a one-year dollar-denominated bond.

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