The mega bill that Javier Milei sent to Congress will allow the government to take on external debt in foreign currency, without maximum limits set by Congress or authorization by lawmakers. This follows from chapter IV of the text referring to public credit operations.
The initiative repeals article 1 of the Law on strengthening the sustainability of public debt approved in February 2021. It established that the Finance Act should set a maximum percentage for the issuance of debt in foreign currency and subject to foreign legislation, respecting the total amount of public debt. emissions in that year.
The repealed article further provided that “any issuance of public securities in foreign currency and under foreign legislation and jurisdiction exceeding the said percentage shall require a special law of the Honorable Congress of the Nation expressly authorizing it.”
In this way, if the Executive were to restructure foreign debt with private bondholders, it will not need the approval of Congress, as happened in 2020 when the Minister of Economy, Martín Guzmán, restructured foreign law obligations with private creditors for 64.8 billion dollars.
On January 6, Argentina faces a deadline from private bondholders for $1.6 billion, half of which corresponds to state-held bonds. According to the South American consultancy firm, in 2024 debt commitments with private individuals will reach 4,380 million dollars between principal and interest.
In 2021, Guzmán estimated that renegotiation to restructure debt in foreign currency and under foreign law would provide relief of $37.7 billion between 2020 and 2030. But then his successor, Sergio Massa, put in the exchange rate is doubtful due to the subsequent debt collapse. the value of the bonds.
What will happen with the negotiation with the IMF
Future agreements with the Monetary Fund will continue to depend on the support of Congress, since the bill does not repeal Article 2 of the Strengthening Law, which establishes that any program with the organization, as well as the expansion of the amounts of such operations will require an act of Congress.
In March 2022, lawmakers approved the current deal with the IMF to refinance the $44 billion loan made during the administration of Mauricio Macri. Now, the Minister of Economy, Luis Caputo, is trying to negotiate a new program in exchange for a more demanding adjustment than the one expected by the organization.
The agreement provides for the disbursement of 6.5 billion dollars until September 2024, of which 3.3 billion dollars should have arrived in November. As Argentina failed to meet its targets, the funds were left in limbo and Caputo had to ask for support from the United States and the IMF to build a financial “bridge”.
In the next 20 days, Argentina will face deadlines with the Fund for almost 2,000 million dollars (1,300 million dollars on January 9th and 650 million dollars on the 16th of the same month). Like Sergio Massa at the time, the government had to resort to the help of CAF to pay 900 million dollars to the IMF last week.
Source: Clarin
