A loan with Wall Street banks is overdue and Sergio Massa is now talking about establishing a link with the Chinese

The government continues its research financing from foreign banks and funds. The goal is to calm the financial front amid the difficulties of accumulating reserves, reduce the exchange gap by 120% and lower the country risk. While dollar credit (REPO) with Wall Street banks is lagging behind, the Ministry of Economy is also exploring a financing mechanism with China and one with the IMF.

As for the first, according to sources from Sergio Massa’s team, an alternative would be that of placement a bond with the Asian country in exchange for yuan and with those funds you take out a loan with Chinese banks to finance exports to that destination. The intention is to reduce the trade deficit with China, which in seven months totaled $ 6,582 million, as the main source of Argentine imports and the third destination for local exports.

The proposal was misled by the minister more than a week ago in a meeting of over an hour with the Chinese ambassador, Zou Xiaoli. He also insisted on an extension of the $ 3 trillion swap, which the head of the central bank, Miguel Pesce, has been negotiating since February. “The approval of the People’s Bank of China is missing, Pesce signed it, it was delayed and Massa got involved”, said close to the minister.

Massa keeps all those channels open in the face of obstacles to getting dollars, without devaluing. According to private calculations, net reserves are approximately $ 1 billion. Operations with the soybean dollar and bills of exchange so that banks could capture foreign currency from the countryside were also unsuccessful. Official and bank sources confirmed that last Tuesday’s auction was deserted.

The economy continues to negotiate with international banks. Massa confirmed three ‘Repos’ last week with an Asian, European and US bank, which he asked to unify the offers. According to sources from his team, they would have received five proposals. Most for debt repurchase and one of them to strengthen reserves. “There are already over three offers, up to $ 2,000 million,” they say in an office.

The operations of Redemption Agreement (repo) They are loans that are usually made with debt securities or financial assets and work like a pledge agreement.: the Central Bank receives the dollars and delivers the collateral securities, with the commitment to repurchase them. The purpose could be to cancel debt or add liquidity. The problem today is the cost it would have for the country given the low prices of bonds.

To obtain $ 2,000 million, economists and banks estimate that it would be necessary to deliver bonds with a face value of between $ 10,000 and $ 20,000 million. “We believe that the combination of current bond prices and a cut of at least 50% means that the value of the collateral will have to be 10 times the money obtained, which no government should accept,” the bank warned weeks. Brazilian investment company BTG Pactual.

According to Fernando Marull, of the consulting firm FyMA, the general rule is $ 1 for every 2 guaranteed securities. Since they are worth 25%, you would have to give up 8 bonds for every dollar. And, in this way, 16,000 million dollars would be needed.

Drawdowns relate to conditions, rate, and capacity or collateral (the percentage of the security’s value covering each dollar). On the market they believe that up to $ 1,500 million can be obtained for a duration of no more than one year and a rate of between 8 and 10% due to the Argentine risk. This is a greater cost than in 2016, when the head of BCRA, Federico Sturzenegger, agreed with seven banks a REPO of $ 5,000 million at the rate of 6.7% for 11 months.

Another financial front facing the government is ongoing talks with foreign funds holding pesos bonds. In September, $ 100 trillion expires and there are funds like PIMCO that have these documents in their hands. Finance secretary Eduardo Setti tries to roll over the debt to avoid putting pressure on the CCL dollar, but investors are asking for very short-term inflation-adjusted bonds (CERs).