Peso debt: K officials and economists say they are not leaving ‘a bombshell’

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The declaration of the national council of Together for Change, according to which the Government is “leaving an armed bomb for the people”, met with a strong response from those close to the Economy Minister, Sergio Massa, who defined the phrase “explosive and sellers”. While within the arc of the opposition, Javier Milei reappeared to criticize Horacio Rodríguez Larreta.

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Who picked up the glove is Sebastián Galmarini, director of Banco Provincia, leader of Frente Renovador and brother-in-law of the Minister of Economy. “They are playing with fire,” warned the Buenos Aires official of the Renewal Front, continuing the fiery saga.

“We must not trip over the same stone,” concluded the Buenos Aires leader who was one of the few who came out to cross paths with JxC.

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Another of those who responded was the new head of the cabinet of presidential advisers, former CEO of the agricultural company Syngenta, Antonio Aracre.

“Time bomb? Uusury rates impossible to pay? Juntos por el Cambio really believe that people have no memory to remember how we got to the IMF and the ‘reprofiling’ (euphemism for default) of ex-minister Lacunza?”, asked the president’s new official Alberto Fernández.

For his part, the Deputy Minister of Economy, Gabriel Rubinstein, also stated on Twitter that “the care of the financial system and the local capital market is a priority” for the government and that, for this reason, the current administration is working to increase demand for peso assets, instead of borrowing Argentina in foreign currency in the short term, at interest rates approaching 7.5%, as the Mauricio Macri administration has done.

Sergio Massa’s Deputy Minister of Economy wrote on Twitter that “the debt/GDP ratio, which rose from 52.6% to 89.8% in the course of 2015-2019, in the third quarter of 2022 has already accumulated a decrease of 10 percentage points to 79.8% At the same time, a “de-dollarization” of debt compared to that received in 2019, going from a debt ratio in Dollars of 70% to the current 53%. debt in relation to the size and capacity of the economy is significantly reduced in a very short time”.

Late Monday evening, the national council of Together for Change (JxC) issued a statement warning of the “bomb” the current government will leave to the next administration. The second paragraph of the statement follows: “The national leadership has spoken out against the use of financial instruments in pesos, adjusted in dollars with interest rates that are impossible to pay, or in dollars at usurious rates. With this, the national government no longer speculates leaving a time bomb to the next government”.

Another economist who warned about the consequences of the opposition statement was the former Deputy Economy Minister, Emmanuel Alvarez Agis. “Apparently, the opposition not only does not give up on rumors of non-payment, but also publicly claims that the debt in pesos is a ‘bomb’. It is worth clarifying that bombs are not paid for, they explode”.

Cristina Kirchner’s former deputy minister underlined that “we recall that 14% of the total debt of the Treasury and the BCRA does not pay interest, 37% is issued at a fixed rate and 49% at a floating rate. Assuming inflation of the order of 100%, the weighted real rate of the Treasury is +0.67% per annum, and that of the Treasury and the BCRA combined is -5.8%. They don’t look like “unpayable” interest rates. In a context in which Argentina does not have access to the international market, the internal market appears as the only alternative to finance the fiscal deficit”.

Finally, Alvarez Agis speculates in his letter to clients that “the decline in inflation and the normalization of the economy” after 2023 “will be gradual”. And he says that for the opposition “If this option doesn’t seem politically feasible, the second is to bet on an economic explosion during the current government”.

Source: Clarin

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