By Sarah Marsh
BUENOS AIRES, Oct 7 (Reuters) - Argentine President Cristina Fernandez on Tuesday dismissed fears the country's new civil code would allow debtors to repay foreign currency obligations in pesos, but confusion remained over the likely impact of a disputed clause.
Fernandez signed into law a new civil and commercial code that will go into effect in 2016 and contains thousands of articles covering issues as diverse as same sex marriage and bank transactions.
Legal experts and economists have raised concerns over Article 765, which states that a debtor could fulfill his foreign currency obligation by "giving the equivalent in legal currency (the Argentine peso)".
This option has raised the specter of the "peso-fication" that took place in the wake of the South American country's catastrophic 2002 default. Argentines lost a third of the value of their savings when the government converted dollar deposits and loans into pesos at a worse rate.
But Fernandez said other articles in the new civil code clarified that contracts would be respected as agreed between both parties and bank deposits would be returned in the same currency in which they were paid.
"All these affirmations, headlines to frighten people about how deposits will not have any value and will be returned in pesos ... please, these are absolutely out of place," leftist Fernandez said in a typically fiery speech.
Argentina's foreign currency reserves have fallen to 8-year lows this year, and the country faces a balance of payments crisis next year when its debt servicing costs more than double.
Legal experts and analysts say it is not clear which contracts the disputed article applies to and whether other clauses trump it. The Justice Ministry was unavailable for further clarification.
If applied to corporate and public debt under Argentine law denominated in dollars, it would likely scare off investors who would have no legal certainty about whether they would get their loans back in the same currency.
The Argentine peso, which is fixed by the central bank, has devalued around 22 percent against the dollar so far in 2014 and many economists expect a further devaluation by year-end. The peso is worth much less on the black market.
"This particular section of the civil code will be changed because it doesn't make sense," said one Argentine legal expert who declined to be named. "Debtors will not have access to any creditors with this kind of code."
Deputy justice minister Julian Alvarez, quoted by local media last week, admitted the code may contain "internal errors" that can still be corrected before it is implemented.
(Additional reporting by Walter Bianchi, Nicolas Misculin and Ricardo Mangano; Editing by Ken Wills)