2023-06-02 11:28:31
As expected, the national government’s decision to limit the provinces’ access to the official dollar to pay the maturities of their bonds in foreign currency will complicate the governments of Neuquén and Río Negro, who will have to face payments with their own funds or renegotiate with your creditors.
Short term, the most affected is Neuquén, which has maturities for US$ 72.5 million until the end of the year. Río Negro has to pay US$10.6 million in September. But in the long term, the situation becomes more complex, since the province has 70% of its debt in foreign currency, while its foreign currency income is more limited than that of Neuquén.
- 72 million
- dollars will have to pay Neuquén until the end of the year, which were within the budget forecasts.
- 10.6 million
- dollars must be paid by Río Negro as part of the payment of the bonds corresponding to the Castello Plan.
The rule issued yesterday by the monetary authority establishes that the districts must present a proposal to the BCRA that contemplates a cancellation of up to 40% of the capital maturities and that the rest of the capital obtains new financing, at least, for two years.
The measure is effective as of today, June 2. As indicated by the BCRA, in “the case of maturities that are registered until July 18, the presentation of the plan before the Central may be completed up to two business days before the expiration date,” said the entity in charge of Miguel Pesce. Likewise, it was clarified that the rule covers capital, not interest.
The BCRA highlighted that “It had not established any restriction for the provinces in this complex context” and now “the governors are asked to make an effort.” And he affirmed that “no province is being brought to a critical situation and those who are being asked are in a position to comply and accompany this effort.”
But Neuquenone of the most affected, did not welcome the measure, which it interpreted as “another patch to the weak reserve situation” of the Central and a measure that “unbalances the balance and changes the pre-established rules.”
As reported from Economy, Neuquén has 72.5 million dollars left to pay until the end of the year “that were in the financial forecasts of payment.” The government does not use its own dollars to cancel debt, but rather accesses the Single Free Exchange Market (MULC) to “match” the issues in currency that can be settled at the same exchange rate as the resources. How much money is available in foreign currency, was something that no official answered yesterday. Neuquén has at least two reserve accounts located abroad, who receive the royalties promised as guarantee of payment for the loan with which Credit Suisse and Ticade bonds.
“Limiting access to the MULC to 40% and for the rest to obtain new financing with a minimum payment term of two years is very complex because we do not have the use of sufficient credit to make an issue of this volume,” questioned a high-ranking source yesterday. government. The 2023 budget authorized Neuquén to borrow up to 54,163 million pesos, of which only 37,800 million are to issue new titles or Treasury Bills. The path of Neuquén’s debt in dollars began to get steep this year and will continue even more uphill between 2024 and 2025. The greatest burden of maturities will fall on the administration of governor-elect Rolando Figueroa. If Gutiérrez were forced to carry out a new issuance, it might help his management to guarantee financing or “flatten” the maturity curve, as he has already anticipated is his objective.
Río Negro has 70% of its bonds in dollars
Río Negro has 70% of its debt in dollars and in September must pay US$10.6 million, corresponding to interest on the bonds launched within the framework of the Castello Plan.
The Province is not in the “top five” of the most committed with their liabilities in foreign currency, but the decision of the Central Bank that forces them to cancel those obligations with their own resources will demand new strategies from the Ministry of Economy led by Luis Vaisberg.
The Castello Plan It already bothered the Río Negro government before this new stocks were defined, with different public interpretations regarding the possibilities of facing payments without affecting the financial health of the State.
The governor, Arabela Carrerassaid earlier this year that the titles released in 2017 today represented an “unpayable” debt and days later, the senator Alberto Weretilneck He raised a different look.
“I do not share what the governor says, I think that it can be paid. We have different elements. We will evaluate it at the right time, but the Castello Plan is payable,” said the leader who governed Río Negro when the program to finance 24 large-scale projects was defined.
According to the data published on the website of the Ministry of Economy, the stock of debt for the “Bono Plan Castello” represented a total of 69,005,920,248.50 pesos in March of this year (latest data available).
That amount means 70.75% of the overall provincial public debt, which on that same date was 97,539,746,984.95 pesos.
sources consulted by BLACK RIVER Journal considered yesterday that a greater restriction on access to dollars by the Banco Central it will generate additional problems for the Province, because the debt service is already behind.
In addition, there might be budget difficulties, because the Legislature approved a Budget with a differently structured debt, therefore it is likely that a parliamentary debate will be necessary to reform it.
Analysis: Scratching the Bottom of the Pot
Diego Penizzotto
diegopenizzotto@rionegro.com.ar
The foreign exchange shortage that haunts the national economy, is the guiding axis of any of the edges of the economic management of a government that is on its way out.
The maximum objective to which the economy minister can aspire today Sergio Massais to prevent the fragile equation of the exchange rate, prices and wages from collapsing before the end of the year.
The main obstacle to achieving this is neither the inflationneither him fiscal deficit, nor political uncertainty. Not even the IMF is, strikingly willing to forget its historic efficiency prerogatives in favor of contributing to Argentine stability. The main obstacle is the shortage of foreign currency. Dollars? There is no.
That is the premise with which Massa traveled to China, to swell the reserves. With the same objective, Alberto Fernández tried unsuccessfully this week to find Latin American credit at the summit with Lula. With the same intention, the advance of disbursements scheduled until December is negotiated once morest the clock with the Fund.. You have to “scratch at the bottom of the pot” every last dollar in circulation.
It was a matter of time before the gaze settled on the provinces and municipalities, and the Central Bank yesterday put the situation in white on black. The measure announced by the board of the BCRA establishes that the provinces will only have access in the official market to 40% of the dollars they need to face their debt payments. The remaining 60% must be obtained by resorting to their own currency holdings, obtaining funds in the financial market, that is, at a price 88% more expensive in pesos, or by refinancing the debt with creditors.
Private estimates indicate that the provinces have maturities for some US$ 1.4 billion in the second half of the year, and that Neuquén is one of the provinces that is most exposed in dollars. According to the BCRA, there are at least US$1.2 billion held by the provinces.
The measure is not surprising. It is similar to the one that applies to companies since last year. However, there are two issues that remain in evidence.
The first is that although the focus tends to rest on the national state, the provinces are a central part of the national financial economic frameworkand that responsibility falls to the governors.
The second is that taking debt in dollars generates, in the short or long term, an impregnable bottleneck. The premise is valid, even in a region like Dead cowwith an enormous capacity to generate foreign currency.
Córdoba will present a legal protection
The province of Córdoba rejected the resolution of the Central Bank that restricts the provinces’ access to the purchase of official dollars to repay debts in foreign currency. “The unforeseen measure is discriminatory and anti federal, attacking the normal development and autonomy of the provinces; even more so, when those commitments assumed in dollars have been authorized to be contracted by the national State itself, generating notable damage to the province of Córdoba”, warned the government of Juan Schiaretti.
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