Could Argentina's gold reserves be seized due to YPF debt?

Argentina's government has decided to send part of its gold reserves to a European country. The objective of this transaction is to financially produce the country’s holdings, which inside the Central Bank’s vaults were safe, but not profitable. That strategy, revealed by President Javier Milei and his Economy minister Luis Caputo has not yet been confirmed by the Central Bank, in charge of watching over those assets, though it must acount for a request for public information presented by union La Bancaria.

However, the biggest problem is the uncertainty the possibility of a seizure of those holdings has caused in the financial system and the political world once they leave the country. The shadow of the Fragata Libertad being withheld in Ghana in 2012, given a claim from so-called vulture funds for a seizure to collect on court debts has triggered alarms, both in its positive resolution for the country and the priors of the road travelled by those interests.

It just so happens that the trial court decision weighing on YPF, in the case being tried in the United States, and a final judgement on the last so-called vulture fund over the 2001 default have opened the door to the seizure of Argentine assets around the world. Even though financial analyst and Latam Advisor director Sebastián Maril has stated that “seizing sovereign assets is very complex”, he made it clear that it was “not impossible”.

“Over the last seven days, the government announced that it would make pre-scheduled payments of interest of the sovereign debt in New York which are maturing in January and communicated the shipment of gold to Europe. The government’s intention is to show payment capacity and intention and have collateral for REPOs”, said Maril, while in contact with PERFIL.

The financial specialist and follower of the cases faced by Argentina for debt claims considered that the decision by the government to get the gold out of the Central Bank to ship it to a European country is similar to “sending soldiers to the front line”. “He’s sending assets to the two epicentres of seizures over YPF suits and possibly GDP Coupons”, he warned.

“Seizing sovereign assets is very difficult, but if the beneficiaries of the ruling manage to do so, Argentina will have paid for the suits without approval from Congress. The first thing a debtor has to do is to remove their assets from the reach of their creditor. I repeat, this is not what the government wants to do. Their intention is financial and it’s very good. But if they seize these assets (which is difficult), we will have closed a litigious chapter”, Maril stated.

The Secretary General of the Banking Association and deputy Sergio Palazzo has filed a request for public information to get to know the movements of armoured trucks which left the headquarters of the Central Bank for Ezeiza Airport on June 7 and 28. “The Central Bank has received a request for access to public information by the deputy and Secretary General of the Banking Association requesting for details on the administration of gold reserves belonging to the Central Bank. The Central Bank is working on the reply to this request, which will be provided in accordance with regulations”, was the Central Bank’s official answer.

According to Palazzo, “the gold in transit may be seized before any judge which eventually orders a seizure for any of the cases Argentina has pending abroad. It’s an unnecessary risk being run, and they should clarify to us Argentines the reason for this transaction, whether it is to exchange it for foreign currency in another country, or whether it is a credit operation, or whether it is a purchase and repurchase operation with the International Payment Bank. We wanted those details, obviously they still haven’t replied and I guess they’ll take all the time allowed by law, but the Economy miniser anticipated on Friday that these transactions existed”, he said on Modo Fontevecchia.

A source who was a part of the negotiations over the suit against Argentina and YPF played down the possibility that the gold may be seized, though they clarified that “there is a high likelihood that there are new attempts to manage to overcome the judicial barrier which so far has favoured the country”.

The first confirmation of the movement of the gold came from minister Caputo: “It’s a very positive move by the Central Bank, because today there is gold in the bank, which is as though having property domestically and not being able to use it at all. But if you have that gold abroad, it can bring a return and the country needs to maximise the return on its assets”, he said on television

The lack of explanation by the Central Bank and Caputo’s intervention as a spokesman has opened the door for a new argument to prove the figure of “alter ego” given the government’s relationship with the Central Bank, in order to consider their reserves abroad seizable or attachable, as was the case with State property after 2001 and even with the Fragata Libertad in 2012, which was decommissioned as it was considered a warship and not a commercial asset.

There are differences depending on the State where the trials are pending. In the case of the United Kingdom, the likelihood of a seizure is “practically zero”. In the United States there is a small window, but it is permitted by law. However, “nothing can rule out for the so-called vulture funds to charge again with new strategies and arguments to get a favourable ruling, and Caputo’s explanations are dangerous, as the Central Bank should be an institution independent from the Executive Branch”, warned a qualified source in international litigation, consulted by PERFIL.

--TIMES/PERFIL