The Government released the text of the legislative decree on Wednesday night decree of necessity and urgency through which it will oblige public bodies to dispose of their holdings of bonds denominated in dollars, both those subject to foreign legislation (global) and those subject to local legislation (AL).
The document consists From only four items where the most relevant comes first. It states: “Interest service payments and principal amortization of bills denominated in US dollars issued under decrees No. 622 of September 17, 2021, 576 of September 4, 2022 and 787 of November 27, 2022 shall be replaced, on the expiration date, by new public bonds the conditions of which will be defined jointly by the SECRETARIAT OF FINANCE and the SECRETARIAT OF FINANCE, both dependent on the MINISTRY OF THE ECONOMY”.
The DNU, which must be approved by the Permanent Bicameral Commission for Legislative Preparation of Congressbears the signature of Alberto Fernández e of the entire national Cabinet of Ministers..
Meanwhile, the provision will formally enter into force as soon as it is published in the Official Gazette, it is presumed in this Thursday’s edition.
Driven by lack of reserves and inflation, the government has launched a combination of measures to concentrate the management of dollar bonds in the hands of the public sector and contain the dollar’s escalation. Thus, the Ministry of the Economy, chaired by Sergio Massa, will oblige public entities to dispose of their holdings in bonds denominated in dollars, both those subject to foreign legislation (global) and those subject to local legislation (AL).
It is estimated that there more than 100 state agencies with a stock of dollar-denominated bonds with a face value of US$35,000 million. In the ranking they stand out the central bank and the Sustainability Guarantee Fund (FGS) by ANSES.
The idea is that the public sector exchanges its global foreign law (GD) bonds with the Treasury in exchange for peso instruments and, on the other hand, sell Bonares (AL), which companies use to obtain CCL.
For the global bonuses it receives from public bodies, it will disburse bonuses to be defined: connection in dollars or pesos adjustable by CER. It will be for the equivalent of US$4,000 million.
On the other hand, Economía aspires to place more Argentine-denominated dollar bonds on the market and concentrate, together with the Central Bank, control of the rest of the AL bonds. “This way, Mecon will have the ability to operate in the dollar financial market without affecting reserves,” they told Economy.
It happens that Public Organizations have to sell the Argentine-denominated dollar bonds to give more liquidity to the dollar cash market. Since they will be selling against pesos, they aim to absorb around 2 trillion pesos. Those pesos will then be turned over to the Treasury, in exchange for a bonus in pesos. With the tickets you receive, The economy will finance the fiscal deficit without turning to the monetary question. In terms of the economy, “we will reduce the circulation of pesos by 2 trillion.”
At the Palacio de Hacienda they believe that the decision to delist the globals will reduce the external debt in dollars and improve its value. Massa repurchased $520m – mainly from GD30 – to hold finance dollars, but its price fell 12% in March and the IMF called last week for these operations to be halted with reserves. It would also abort the repo credit, while apparently not impeding the new plan.
Alycs will be able to trade with AL bonds
Another key measure will be lifting restrictions on brokerage firms (Alycs) to trade AL bonds and “dollarize” to the CCL, a dollar that arises from the trading of bonds and which this Tuesday closed at almost $400. Today the Alycs have limits on the volume they can operate with wire and also a minimum duration, the so-called “parking”, that securities must remain in the portfolio before being liquidated.
The bet in Economics is that largest offering in AL eases pressure on cash with liqui, a market whose daily average is around US$ 25 million. For this there will be resolutions by the CNV, the Central Bank and the Insurance Superintendence. And it is expected that there will be public auctions for the participation of private entities. Officials will discuss it this Wednesday morning with banks, brokerage firms, investment funds and insurance companies.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.