Reprogramming debt: a risky move that spreads political costs

The measures announced by the Minister
Hernán Lacunza they have a pretty clear reading in political terms: if most of the presidential candidates of the opposition – with Kirchnerism at the helm – pose a problem ahead
refinancing of the public debt In foreign currency, let's start now and add more uncertainty to the markets. In other words, the government is seeking to spread the political cost of extending the
LETE and
The cap.

This debt will be paid with no capital or interest, but according to a selection criterion that deliberately leaves individual investors and savers ("human beings") safe, so as not to add problems or subtract votes from this flank. the minister, they represent 90% of the holders of these securities, although this percentage is not proportional to the amount of debt held by large institutional investors (mainly banks and insurance companies). This segment included in the forced "reperfilation" will recover its credits in a staggered manner (15% at the initial maturity, 25% at 90 days and the remaining 60% in 180 days).

This measure is resolutely directed towards the short term, with the stated aim of decompressing the use of reserves
central bank payment of the Treasury debt and reverse them to cope with the increased demand for
dollars in the
Forex Market Until December 10, maturities of dollar and peso letters rose to $ 10 billion and its voluntary renewal on the local market has become a nightmare for the Palacio de Hacienda since the result surprising of the
STEP and the negative reaction of markets to the triumph of
Formula Fernández-Fernández.

So much so that yesterday's submission, which was a virtual test (of trust or mistrust), was declared nil soon after Lacunza himself revealed that the renewal percentage had dropped from 80% to 10% . Although the financial program complies with
Monetary Fund With a relatively low average turnover (by 46% of maturities), the trend has been strongly reversed.

In the call for tenders held in mid-July, rates of 4% in dollars for maturities prior to December 10 and 7% for the following were accepted. In pesos, they were 72% and 63%, respectively, when the polling stations gave the decision of the ruling party a better chance.

Anyway, it's risky. In the markets, this could be interpreted as a unilateral and binding change in terms, with negative repercussions on country risk and default credit insurance rates, which have been pronounced in recent days. The generic ads of yesterday have also left several gray areas. Among them, the treatment of shares of individuals in mutual funds investment in letters, whose rescue will be extended and phased.

On the other hand, although the BCRA has greater firepower in the reserves to stabilize the dollar and mitigate the volatility of the currencies, it remains to be seen what will happen to demand for foreign currency and its exit from the economic circuit due to political uncertainty. To subtract the pressure on the dollar, the BCRA yesterday imposed a cap on the amount of credits in pesos granted to grain exporters, with the reissue of a measure similar to that adopted in 2014, but under the exchange rate.

Intention shared

Judging by the careful statement issued yesterday by the spokesperson of the
MFIs Shortly after the announcements, the agency shares the official intention to meet the liquidity needs and preserve the reserves, pending the first reactions of the markets. However, the US $ 5,400 million disbursement expected in mid-September has not been mentioned, although the last paragraph ("The Fund will continue alongside Argentina in these difficult times"). ") suggests that it would not complicate the transit before the elections. from October 27th.

As for "
reperfilation"
debt maturity In the medium and long-term local market (2020/2023), with no withdrawals of capital or interest, the perspective is different as it will depend mainly on the Peronist majority of Congress, which should take into account the need to reduce the exorbitant risk to which countries are exposed. instead of empowering it.

The same is true for voluntary debt refinancing projects under a foreign law, collective action clauses, in order to extend the deadlines without delay and alleviate the need. public sector financing during the same period, in return for willingness to pay. . Here, the scheme implicit in the announcements of yesterday resembles the one that Uruguay applied successfully in 2002, unlike the noisy defect proclaimed by Adolfo Rodríguez Saá under a shower of papers in Congress.

Regarding the extension of the conditions for repayment of IMF credit (whose main weight is in 2022 and 2023), the political cost for the next government will be the probable obligation of structural reforms (tax, retirement, work) as well as discipline. Tax and monetary.