beyond the support of Cristina Kirchner to the bond exchange launched by Minister Sergio Massa, a Fernanda Ravetta it will be difficult for him to sign that operation.
The head of ANSeS must authorize the sale of dollar bonds to US$23, which is the same as the economy minister ordered in January to buy by paying US$32.
Buy high and sell low is the basis for a bankruptcy, but also becomes relevant when it comes to asset management to support retiree operations.
The recitals of decree 164/2023 already mark the difficult situation that the economy is going through, underlining the need to raise funds to fill a growing fiscal hole and “reduce the negative incentives generated by the exchange rate gap on inflation”.
The game of Sergio Massa obtaining financing has as its risk basis the fact that until now the state has dollar bonds and is now proposing sell them cheaply to the private sector maintain bonds in pesos.
This operation is being prepared in an Argentina with annual inflation above 100%. and when the Government will have serious difficulties in respecting the reduction of the fiscal deficit agreed with the IMF for this year.
The offering of dollarised bonds (an old tactic by governments in an election year to devalue a bit and provide exchange rate hedging) is likely to calm free dollars (MEPs and counts with liquidation) after temporarily breaching the 400 barrier dollars, but the last word is far from said.
The lack of dollars and the prospect of those that may be missing is in sight this month where The Central Bank sold $1,459 million and net reserves are about $1.5 billion.
The government and the markets test daily that the drought would generate a 20,000 million dollar drop in revenues and The economy has no way to compensate for this result.
Until now I had tried to cover that deficit trample on importsbut increasingly negative forecasts about economic activity lit the red.
Less than 90 days ago, private forecasts for economic activity in 2023 ranged from 0% to 1% contraction in gross product. The reset of the last few weeks (due to drought cocktail and overstocked on imports) points to drops between 3 and 5%.
The decline in economic activity, inflation above 100% and wages chasing rising prices make for a very complicated picture for government in an election year, with some new political ingredients.
As usual in election years, Kirchnerism tries to maintain late exchange rate in an effort to raise wages above the dollar and inflation. In 2023, this model is difficult to enforce.
The ongoing debt swap shows that the government is left with no way to get private peso finance and that’s why must resort to forcing public bodies to sell their bonds in a striking operation.
He tells the agencies to sell him the dollar bonds from their portfolios. 30% of the pesos they get will be freely available e.g 70% must be used to buy dual bonds, the better of inflation or devaluation.
Thus, the government would have approximately US$2.5 trillion to sell for bonds which, assuming a US$400 dollar, could imply a sterilization of the order of a billion pesos.
The obtaining of this trillion peso loan is faced with maturities of public debt in pesos which, in the second quarter, reached $3 trillion. And what happens $10 trillion between now and September. The financial challenge is more than important.
Meanwhile, the Government recognizes that the 90/100% exchange rate gap is unsustainable, definitely let it be known that he is studying the measures and that at any moment the minister can pull a few more rabbits out of the hat which, as we can see after the 1 and 2 soy dollars, are less effective.
Massa’s new attempt to avoid a currency jump is taking its first steps on a tortuous road in which passers-by are starting to ask for cover at an accelerating pace.
Source: Clarin
