By Jorge Otaola and Nicolás Misculin
BUENOS AIRES (Reuters) - Argentina's new government is negotiating with a group of Wall Street banks for a credit line worth up to $7 billion (£4.6 billion) to bolster its low foreign reserves and help it lift capital controls, a banking source said on Friday.
Centre-right President Mauricio Macri, who took office on Thursday, wants to move quickly to remove currency controls that restrict access to U.S. dollars but is stymied by the central bank's precariously low hard currency reserves.
The commercial banking source said Argentina was in talks with HSBC (L:HSBA), JPMorgan Chase & Co. (N:JPM), Goldman Sachs (N:GS), Deutsche Bank (DE:DBKGn) and Citigroup Inc (N:C).
But he said there remained obstacles to an agreement and that no immediate deal was likely.
"The banks are working on a deal. It would be difficult for anything to come about immediately. There are some key details needed to close this out that are missing," said the source, without giving more details.
Finance Minister Alfonso Prat-Gay declined to confirm Macri's government was in talks with the banks.
"We're negotiating different financing options so that the dollars that should never have left the country come back as quickly as possible," Prat-Gay told reporters after unveiling his team.
CREDIT RISK
The U.S. dollar crunch stems from a festering legal battle with U.S. investment firms over unpaid debt that tipped Argentina back into default in July last year and prolonged the country's banishment from international debt markets.
A second source in the central bank confirmed the talks were taking place but could not confirm the amount being discussed.
"They're working to lower Argentina's credit risk given the fact that it is in default and keeping in mind the new government is working to resolve that situation," the commercial bank source said.
Citi declined to comment.
Argentina's daily La Nacion reported that beyond the possible $7 billion being sought via the group of five banks, a further $1 billion could be secured through a financing agreement with Spanish banks Banco Santander (MC:SAN) and BBVA Bancomer (MC:BBVA).
Argentina's central bank counts its total reserves at $25 billion, but some private economists estimate net reserves are a fraction of that.
"I expect the new government to be able to get liquidity support from the markets" said Sebastian Vargas, emerging markets analyst at Barclays (L:BARC) bank in New York. "It would be a liquidity bridge for the central bank, not financing for the Treasury."