The payment of about $260,000 in pesos rather than US dollars surprised the local capital markets, and may set a precedent for other borrowers in the South American country to pay dollar-denominated debt in local currency.

"Compliance in a timely manner of the obligation was carried out in accordance with existing foreign exchange regulations established by the Central Bank of Argentina," said the northern province.

The bank has cracked down on access to dollars this year in a bid to halt capital flight as the local currency depreciates against the dollar.

The Chaco dollar-denominated bonds were issued in 2006 and come due in 2015 and 2023.

Argentina is a major world grains supplier and rising soy, corn and wheat prices have helped it recover from a severe 2001-2002 financial crisis punctuated by a massive sovereign debt default.

The economy has cooled this year due to sluggish global growth, high inflation, reduced grains output caused by a December-January drought, and investment confidence hurt by the de facto ban on dollar buying.