In a climate of uncertainty due to clashes with the opposition and the state in which the economy will arrive in the elections, The government on Thursday rescheduled the payment of $4.3 trillion of debt in pesos until 2025. It was the fourth bond swap in the Massa era, but the first in which he managed to extend terms to maturity to the next administration.
To ensure high membership, the government granted a battery of benefits for banks, including a higher margin to distribute more dividends. The main focus was “defuse the bomb” of the $7.7 trillion overdue in the second quarter and threatening to release pesos to the market before STEP.
Although the expectation was to achieve 50% adherence, the result showed a participation of 64%, almost in line with the previous January swap, but well below the 80% achieved in August last yearwhen in June Massa released the tool to overcome the financial crisis.
The exchange contemplated two baskets due in 2024 and 2025, meant to offer hedge against inflation and a devaluation, two fears that haunt the market. Faced with expectations that inflation would remain elevated in February and March with a low of 6%, one of the options included only inflation-adjusted securities (CERs) and the other a mix of 70% CER-adjusted and 30 % of dual bonds, which adjust for inflation or the dollar.
Massa was to offer these “bonuses” to attract private banks headquartered in Adeba and Aba, with 20% of the securities maturing by June, in your hands. This Wednesday it incorporated the Abappra banks (led by Banco Nación, Provincia y Ciudad), which made it possible to guarantee a minimum membership of 50%, and the wink of the FGS of ANSES, controlled by La Cámpora and massismo.
But the carrot that sparked the controversy was the guarantee that the Central Bank would compare the securities in case the banks wanted to sell them before a collapse in prices. In doing so, he granted them an “exit” mechanism that allows them to capitalize on a devaluation leap, a decision that enraged the opposition for considering it a “cowardly and ruinous operation”, but which was supported by economists Carlos Melconian and Miguel Kiguel.
The BCR had already done so last July, when it launched the sale or liquidity operations known as “puts”, after the massive outflow of debtor investment funds, which ended with the resignation of Martín Guzmán. Since then, Massa has carried out three exchange operations and raised rates to 119%, without extending the terms beyond 4 months. Now, with this “risk insurance”, he has managed to convince banks to hoard longer documents.
The closing of the operation was scheduled for 16:00, but before that it was postponed to 17:00 and the result was known only at night. Meanwhile, Pesce added authorization for financial institutions to supplement reserve requirements with CERs and dual bonds offered on exchange this Thursday and added another unexpected incentive by allowing them from April 1 until the end of the year to distribute up to 40% of the dividend in 6 equal installments, previously a ceiling of 20%.
For analysts, debt in pesos is one of the main risksis dealing with the economy after the shortage of dollars. Without access to foreign markets and with receipts affected by drought, the market expects the government to finance the deficit with local debt and cut spending to contain monetary issuance. However, there are doubts that debt relief will induce the government to use the “little machine” in elections.
“If the market considers that those pesos not issued to pay down Treasury debt (whether in primary auctions or secondary buybacks) are earmarked for campaigning, uncertainty about the future of the peso will persist,” Ppi warned. And the greater the surplus of pesos in an inflationary context, the greater the difficulty in raising the exchange rate, as claimed by the opposition.
On the other hand, even after the swap, 2023 will remain challenging with maturities exceeding $10 trillion and more than half before PASS. “Although the very short-term profile would be greatly eased with a 70% conversion of eligible securities (that is, virtually no real demand), there would still be maturities between March and July of nearly $5.6 trillion,” Juan warned. Pablo Albornoz, Invecq economist.
Source: Clarin
