The economic team is pursuing a plan to redeem all peso debt maturing in 2024, now equivalent to about $71 billion. The idea would be, from the economic side, to be able to postpone this year’s debt maturities and thus reduce the financial deficit to zero. If this were achieved, then he would allow it drastically reduce the issuance of pesos what the Central still has to do to finance the fiscal deficit, and so turn off the main driver of inflation, namely the issuance of pesos.
The proposal, or rather a very general idea, was presented on Thursday afternoon to a group of bankers by the Minister of Economy, Luis Caputoand the Secretary of Finance, Pablo Quirnoafter a meeting in which the progress of the first weeks of government was taken stock.
Officials, according to the agency Bloomberg, met with representatives of local and foreign banks operating in Argentina on Thursday afternoon to present the plan. They said they will issue new peso bonds in February to exchange them for bonds maturing in 2024.
If the trade were successful, it would be the largest refinancing of Argentina’s domestic debt in history. Negotiations are ongoing and the terms of the proposal could change.
A first agreement has been reached so far and it is this: the finance teams will sit in a sort of “banking table” to discuss jointly design the bonds that would be offered in the exchange. “We must keep in mind that banks are already full of Treasury bills, but not all of them have the same securities. It will be necessary to define whether it is a security that is fully amortized at the end (bullet), the terms, whether there are partial amortizations, whether it is indexed to the CER or whether it is at a fixed or variable rate”. The idea would be to put together something that works for everyone.
A financial consultancy firm carried out this analysis. “This is a swap that, if realized, would cancel Treasury debt maturities during 2024, making it easier to achieve fiscal goals and giving banks the ability to have an inflation-indexed asset that allows them to match deposits in UVA that they are obliged to Take.
Today, Argentine Treasury debt payments in local currency for this year are estimated to be equal 57.5 trillion pesos ($71 billion) at the official exchange rate), according to local brokerage GMA Capital. This includes notes with interest payments tied to inflation, the exchange rate, and fixed-rate bonds, according to GMA, which estimates that about 40% of this debt is in the private sector, rather than public banks, which are usually forced by the government to refinance.
Caputo and Quirno told bankers that the swap will be voluntary and that the bonds will be tailored to the banks’ needs, although they will be placed at market prices, the sources said. The authorities have proposed issuing inflation-linked bonds maturing in 2025, 2026 and 2027 as a possible alternative to the swap.
Source: Clarin
