Sergio MassaMinister of Economy, announced for this Monday Negotiations for the exchange of all bonds in pesos that mature this year, including those held by the private sector, that might be made of new adjustable titles.
According to the information that has come to light up to now, the bonds issued by the Treasury would have two modalities, 80% of them would adjust for CER y 20% would be good duals. The maturities of the exchange of said titles in pesos They would have maturities for 2024 and 2025.
For Together for Changethis is a bomb that will detonate the next government, while from the ruling party they state that the opposition wants to destabilize and reiterated the call to “responsibility and seriousness”, following accusing them of “sow anxiety and uncertainty“.
The electoral relief that falls on the reserves
In this context, the JxC deputy, martin tetazpointed out on Monday morning that said reasoning “Has no sense” when considering that it is not convenient for anyone that “everything explodes”. “The discussion on the debt swap should be discussed in Congressbecause the maturity bomb that is being left to the future Government would limit the possibilities of maneuvering”, Tetaz pointed out in dialogue with Radio Miter.
“No one wins if everything falls. We are looking for an orderly transition, because it is convenient for nobody, that has neither head nor tail, that reasoning does not make sense. what we are asking is that they carry out a debt swap that is convenient for Argentina and that they do not include the Central Bank in this exchange, don’t touch it anymore. That they comply with the Financial Administration Law, ”he warned.
The swap: “The only option”
The economists consulates by PROFILE cThey agreed that the Government had no other option in view of the maturities of the debt in pesos that are due to expire in the next few months. However, they also agreed that “It’s a time bomb and it’s kicking the problem forward”, added to the fact that it would generate greater inflationary problems and a very high deficit by 2023.
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“Given that the debt that is regarding to mature before the elections is unpayable, and as the elections approach uncertainty increases, domestic credit is shrinking. It is best to make a voluntary exchange and try to spend the maturities of this debt for later for the next government to take office,” he explained to PERFIL Aldo Abram, Executive Director of the Liberty and Progress Foundation.
“There are no other possibilities to reprofile the debt, it can’t be done. This is the best option to preserve what What remains of Argentina’s credibility, the word. Then you should evaluate other things such as, for example, the cost to be paid, it is very likely that a dual bond will be issuedyou have to see the rates, with maturities in 2024 and 2025 ”, warned the economist.
Kick the problem: more inflation and a very high fiscal deficit
“It is to kick the problem for following the elections. $12 trillion of debt in pesos was coming due in the coming months, which implied a problem for the current government, in a context in which currencies are scarce and local uncertainty increases by the elections, generating higher volatility observed in the variables”, explained the economist Natalia Butterfly in statements to this medium.
The Government prepares a debt swap in pesos and Together for Change came to the crossroads: “Huge risk for Argentines”
And he added: “The lack of macroeconomic stability causes that in electoral years, the crisis of confidence is exacerbated in the face of the direction that might take over the country with the change of government. Now, this swap enables commercial banks to sell this bond, adjusted for inflation or the exchange rate, to the Central Bank at any time. When this happens, the BCR must issue to pay the bond. That might generate higher inflationary pressures. and on the exchange market”.
And the deficit?
“The announcement of Massa is to keep kicking part of the problem forward, which is the debt that matures between April and June of this year. There is still another problem, which is how they are going to finance the new fiscal deficit, because what they are doing It is to renew the debt that is due and now you have to think regarding how to finance the almost 3 trillion deficit that it is going to have this year”, he indicated for his part, George HillChief Economist at IDESA in dialogue with PROFILE.
For Hill, there was no other way out. “When one has such a deranged State, so messy that they generate a fiscal deficit that they can no longer finance, this swap shows that the debt deficit is already unfinanceable because if they have to launch a bond that matures at 2024.2025, but they put a daily put option on itIt’s almost like the State already no has public credit.”
How will the exchange market react?
“Massa’s exchange is exchanging one bond for another with new terms and conditions. To understand it very simply, the reprofile is to add 15 more minutes to the game and a trade is to start playing another sport. I don’t think the exchange will create problems in the market todaybecause in itself it takes pressure off the next four months. It is a sign that at least there will not be an outflow of local currency assets into foreign currency assets and they are attractive bonuses for now”, Motyl assured.
So, according to the economist’s view, it might be assumed that in what are the most sensitive markets such as the exchange rate “they would remain stable”. However, she warned: “Now if you look at it for 2024 it is a problem and a notice to investors that foreign currency assets today they are cheap compared to local assets that may well have no floor”.
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