Patricia Bullrich, head of right-wing opposition party PRO, has instructed PRO deputies to file a protective action against the decrees requiring public sector bondholders to shed debt in dollars and switch it to pesos.

The writ describes the debt swap as “objectively and factually ruinous”, calling it “new borrowing disguised as a swap” on the grounds that the decrees establishing the swap do not specify whether the foreign law bonds that enter the treasury will be reabsorbed.

On that basis, the writ argues that under Argentine law debt cannot be issued by decree and requires the prior approval of congress. 

It also asks whether the 30% of the debt which is to be made available to public sector institutions that hold it could translate into a loss of assets if the funds are used for routine spending.

Economy minister Sergio Massa announced last week that he would switch public sector dollar bonds into peso bonds and eliminate restrictions on Argentine brokers holding some Argentine bonds in a bid to control the blue-chip swap rate after it hit record values over the past week. The exchange would be valued at some US$4 billion.

The blue-chip swap rate, also known as contado con liqui or CCL, is used in the financial world as a way to get dollars. It is obtained by investors buying shares and financial instruments in pesos and selling them in dollars on the international market. The “CCL dollar” is the implicit exchange rate in that operation. Investors use this type of transaction because there are multiple restrictions on accessing foreign currency in Argentina.

Some representatives from the financial world, including Market Regulation Office (Comisión Nacional de Valores) president Sebastián Negri and financial consultant Javier Timerman, welcomed the move. 

However, ratings agency Fitch cut Argentina’s foreign currency rating from CCC- to C, saying that the move indicated an “imminent” default. It added that the rating would be further downgraded to RD (Restricted Default) once the swap is carried out.

According to the writ, the debt swap puts state pensions at risk by failing to safeguard the funding of the Sustainability Guarantee Fund (FGS), a sovereign investment fund that is part of Argentina’s social security system.

Mentioning National Social Security Administration (ANSES) director Fernanda Raverta specifically, the text concluded: “Raverta must comply with the function of safeguarding the current and future interest of the FGS, and her complicity in the handover and de-financing could make her responsible for failing to fulfill her duty.”

Massa said at the weekend that he would ask for an expert opinion on the swap from the University of Buenos Aires and that ANSES would not participate in the swap if experts determined the swap would be detrimental to it.