An exchange that does not remove all doubts

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Darius Epstein

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Several months ago, debt rollovers in pesos were complicated. Even when it was able to refinance (roll up), investors didn’t want to take a position beyond the STEP. In fact April, May and June of this year have been key months.

April, for example, started with a “peso maturity wall.”

He was facing a critical situation: a debt with a very large volume in pesos that was due in a very short time. The stock was high, but the most complicated thing was the concentration of deadlines.

The government had four options:

1) Continue with the current rolleo (ant) system every 3 months (or monthly). An unhealthy job if there is one and one that has loaded the market with uncertainty. This system had a further problem. Private companies sold part of their bond holdings to the BCRA to be able to bid for the new issues. In short, an indirect way in which the BCRA financed the Treasury, and which was also inflationary. A kind of secret transmission.

2) Resource conversion. Basically improve the debt profile, in this case of longer duration, avoiding the ant roll and the repurchase of bonds by the BCRA. This is the logical option, which is applied by all countries of the world, to the extent that the market accompanies it.

3) Pay. Bonds issued at maturity could have been paid, or part of them redeemed, which would have meant a further issue of Leliq to absorb liquidity or simply accept higher inflation.

4) They could have announced a mandatory restructuring. Something that, in my humble opinion, thankfully they didn’t choose.

A relevant fact is who are the holders of the 7 trillion pesos in bonds expired in recent months. It is estimated that the public sector has almost 50% (35% the nation, the rest some provinces), banks 20% and insurance companies 5%. With the approval of private banks and insurers, he guaranteed the exchange a minimum acceptance of 60%, waiting to see how the provinces behaved with their holdings. Let’s remember that the exchange was voluntary.

Mutual Funds (MFIs), with significant holdings, have probably remained out of the exchange, given their characteristics and immediate term liquidity needs.

Finally the government I didn’t have many options. This was the most logical scenario.

Similarly, more than 3 trillion pesos have been left out of the exchange, which can be reinvested or withdrawn and could pose a threat to inflation, the exchange rate and the exchange rate gap in the coming months. He risk and uncertainty have decreased but have not disappeared.

the capital market

The capital market should be the natural place where the public and private sectors are financed. With the international markets closed to the Government, the local market remains.

The latter grows below the Treasury’s borrowing requirement, so that it is impossible for it to take on new debt to cover the deficits of 3.5%, 2.4% or 1.9% agreed with the IMF for this year. It’s mathematically impossible. It is not possible to finance several years with a primary deficit of 2% or 3% on average.

Let us also remember that the country grew by more than 5% in 2022. But the market has not supported this increase.

The disappearance of the local market it’s not random. Successive governments have punished it instead of encouraging its development.

The most recent example is the restriction by former Economy Minister, Martín Guzmán, that banks, insurers and mutual fund funds cannot buy “hard dollar” bonds. And even worse for Argentine-registered bonds: AlyCs (Equity Market Corporations) cannot increase their position in dollar bonds at the end of the day. And this without talking about parking, restrictions and measures that slow down growth, all to avoid the operation of Dollar Cash with Liquidation (CCL)

But also We recall the compulsive “reprofiling”. of the peso bonds of Mauricio Macri’s former economy minister, Hernán Lacunza, who punished local footballers avoiding touching external debt.

There are no miracles. you can’t grow based on discounts, regulations and taxes.

That’s why the market shrinks.

As follows?

The only obvious solution is “Deficit 0”. and urgently. There is no market for continuing to finance deficits. Politicians from both major parties have to sit down and agree on how to reduce public spending.

Cursed inheritance is not debt stock, but huge public spending that suffocates people and businesses with taxes, regulations, inflation and growing debt.

But no politician is encouraged to spend, especially in an election year. Will this time be different?

Source: Clarin

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