Gabriel Rubinstein defended the debt-to-peso swap and criticized the economists of Together for Change

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Instead of discussing a successful trade, why don’t we discuss the future? Under this headline, Gabriel Rubinstein, deputy economy minister, issued a statement defending the recent debt swap for 4.3 trillion pesos and criticized the economists of Together for Change who had opposed the operation last week .

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Specifically, Rubinstein pledged against former minister Hernán Lacunza, former Central Bank president Guido Sandleris and MP Luciano Laspina. In the text he denied the statements of these economists before the exchange and then invited them to discuss the 2024 Budget for theMove fiscal bills towards balance, instead of projected deficit of 0.9% of GDP.

Rubinstein’s text

On Thursday, March 9, a debt exchange in pesos was successfully concluded, which made it possible to extend the maturities in the coming months by approximately 4.3 trillion dollars, which will then mature in 2024 and 2025. In this way, We have begun to “melt the towers” of the pre-election deadlines that generated so much concern.

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Investors, businessmen, governments of other countries, big savers, let’s say “the market” in general, have welcomed this result very well.

I thought, naively enough, that my colleagues at Together for Change, who I’ve known for years, would also acknowledge success of this provision and will begin to change the subject, placing themselves in a more collaborative position. Not to “help” the current government, but to remove things from the table that only hurt the country and all political forces.

If they win do they want savers and investors to be afraid of holding government bonds? And that depositors fear that banks have government bonds? Since that sounds pretty crazy to me, I thought we could start “raising the bar” of public discussion. And that we would start talking and discussing more important things, like: what can we do to eliminate the fiscal deficit, so that the state doesn’t have to increase its debt?

Hand. Through a statement and through tweets from Hernán Lacunza, Guido Sandleris and Luciano Laspina, Together for Change has once again shown its most premature face.

Let’s review and comment a little on what they said: 1) “A cowardly and ruinous operation”. A long-term, reasonably priced, voluntary, ruinous exchange for whom? Certainly not for the State (or is default less ruinous?). Vile? What does it mean done with evil, a despicable deed. Is that the word for a voluntary debt swap? Boys…

2) “It would violate Article 19 of the BCRA Organic Charter”: Why do you think this, if the BCRA does not guarantee the bonds?

3) “It would violate the Finance Administration Act” Why do they say so, if the State manages to extend terms and at lower rates than those in force on the market? (Would you like lower rates? How about we stop saying that debt below 10% of GDP is unsustainable and helps keep long-term rates ever lower?)

4) “The debt would be due every day”, for the erroneously called “put”. They seldom fail to understand that, with or without explicit assurance, when a bank invests in medium-term assets (say, 2 or 3 years) and its liabilities are 30 days (or less) that it requires a liquidity window that can pay the BCRA (the prepayments of illiquidity or, in this case, the so-called “puts”). Banks already have a put on government debt (i.e. the swap does not “aggravate” the situation), and they simply don’t use it because they have to pay that put, and when they do use it they have to sell the bonds to the BCRA at below market value . Only in the case of a “rush” would it be convenient for them to use it massively. What case could it be? For example, that Together for Change won the election in 2023 and an influential government economist told the president: “Mr. President, I have come to the conclusion that there are many pesos left. To which the President asked: “And what do you suggest?” To which the economist would reply: “Reprofile the debt.” And the president said, “Okay. Let’s move on.’ Panic in the market. Bondholders looking to sell. And there, the BCRA buying the debt, surely in the midst of a run on deposits. bonds about to default.Depositors would have plenty of reasons to flee.All because of the stupidity of the government.

5) “If the option is exercised, it could trigger another jump in inflation that no responsible central banker could admit.”. Following the reasoning above, the responsible thing for them would be: “Since the BCRA shouldn’t be buying bonds, they should stay in the banks so we can reshape them. And if depositors are afraid, well… we will have to prohibit them from withdrawing deposits (corralito, corralón, bonex plan, etc.).” Because the “sacred” thing is that the BCRA does not issue to stop bullfighting (caused by the government itself). In other words, the responsible conduct would be to go from default (bondholders) to default (depositors). It is irresponsible behavior, what we are developing, trying to avoid all this. Look at you guys!!!

6) “They give banks an option that no investor has” (Put). In other words, banks have access to discounts for illiquidity, repurchase agreements against bonds, etc. that individual investors do not have. Precisely because they are banks and safeguarding the safety of depositors is a fundamental function of the BCRA.

7) “The debt that was due every 3 months will now be due daily”. As explained, it’s false, as the “put” exists now and hasn’t changed.

8) “This action (exchange) could generate serious problems for present and future management.” I would tell them: don’t worry so much about the current management. For us it is a very good measure. And as far as the future is concerned: if you see too much of a challenge to manage a debt of less than 10% of GDP, with maturities now more extended over time, don’t you think you should check whether you feel capable of running the government? Look, it’s full of more difficult problems than this.

Alright. It is what it is. And the political forces must continue to look for a way to understand each other and solve the problems of the Argentine people.

By the way, months go by and A budget for 2024 will have to be agreed. And here this ministry is keen to achieve a primary fiscal balance as soon as possible (and therefore primary fiscal surplus). And “a little bird” told us that Together for Change also apparently agrees with that goal.

How about, then, if we leave all this “nonsense” aside and start technical-political discussions from now on, Let’s see if in 2024, instead of the 0.9% deficit (agreed with the IMF), already with a more healthy economy (no drought, NK1 pipeline completed, new government, etc.)do we dare to seek a balanced budget? What expenses would we lower? What tax breaks could we leave out? Does anyone propose to raise taxes? Lots to discuss. And who knows, maybe we could agree.

And we would start to leave this issue out of the political discussion as well: the need to balance public finances.

And look at you: in one of those, almost without thinking about it, we would reach: a) Stop proposing default as an economic policy toolab) Stop discussing the need for fiscal balance and focus the discussion on “how to achieve it” (how much to cut spending, how much to raise taxes).

That would not be a small step forward.

You can call the Secretariat of Economic Policy and, If you want, we can start talking tomorrow.


Source: Clarin

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