The Ministry of Economy exchanged this Tuesday 85% of the 2.5 trillion pesos of debt maturities in pesos that were piling up in the next three months and that generated concern in official offices and in the market, which questioned which was the government’s remaining financing capacity in local currency. After the operation of the last few hours, which had private and public participation and a smaller number of external funds, the need to obtain at least another 1.5 billion will remain on the horizon, as a goal in the last stretch of the year.
In the official offices they assure that the result of the exchange was higher than expected, something that they translate as a kind of “support” from the market for the replacement in the conduct of the economic policy of the Executive Power. “There was a change in expectations and that is very important,” an official source who worked these days in the conversion operation mentioned in the last few hours.
The fact of having cleared 2.1 trillion pesos makes the economic team think that most of the task on the financial front has been solved. In that sense, the new calculation they make is that there will be, until the end of this year, about 1.5 trillion between the remaining four months of 2022, of which $600,000 million will be concentrated in November.
They will remain on the horizon of the financial program, as a goal in the last stretch of the year, the need to obtain at least another 1.5 billion
The success that the Government has in obtaining funding in the capital market will mark the possibility of complying with the spending cuts necessary to adjust to the fiscal target of 2.5% agreed with the IMF. It is, after all, the financing faucet that will subtract from the Executive Power having cut off, by Massa’s decision, the path of transitory advances from the Central Bank to the Treasury.
The authorities of the Ministry of Finance, which Eduardo Setti commands since before the arrival of Massa, since he took over in the brief interregnum of Silvina Batakis, estimates that there will be an “extra” portion of pesos that must be obtained in the fortnightly attestation that implies the bids with the market. The logic is that the pesos that it will stop requesting from the monetary authority must come from debt placement operations.
Finance Secretary Eduardo Setti
Beyond in time, the 2023 financial roadmap marks two well-pronounced instances. In general, there will be a profile of maturities of bonds and bills in pesos of 6.7 trillion. But the peculiarity is that 97% of that amount falls until September, which indicates that there is still a resistance from investors to bet beyond the primary elections in August.
The weight of the debt indexed to inflation, something that worried the International Monetary Fund, which asked to reduce dependence on this type of financing, was until last June 85% in relation to the total debt in pesos.
According to official sources, with this swap operation – which among the options in that dual bond offered to holders included the possibility of charging according to the evolution of inflation, with a parallel coverage in dollar linked in a devaluation scenario – the stock of debt tied to rising prices would grow, although not considerably.
The success that the Government has in obtaining funding in the capital market will mark the possibility of complying with the spending cuts necessary to adjust to the 2.5% fiscal goal agreed with the IMF
The voluntary swap of debt in pesos carried out yesterday by the Ministry of Economy reached an acceptance of 85% and, in this way, the government managed to postpone until 2023 payments for $2 billion that had to be made in the next 90 days.
“The National Treasury had to face maturities of $615,862 million in August, $1,123,801 million in September and $807,068 million in October. After this conversion operation, it managed to reduce the projected maturities to $115,318 million, 209,337 million and $155,336 million, respectively”, sources from the Palacio de Hacienda pointed out.
The conversion operation received a total of 1,233 offers that had titles in their possession for a total nominal value equivalent to USD 15,662 million, “which is equivalent to a cash value of $ 2 billion.” From the Government they highlighted that “83% of the maturities projected for the month of October, were placed in the dual instrument with maturity in September 2023. That is, $651,862 million were awarded post PASO 2023″.
The Ministry of Economy will face 1.5 billion pesos in the remaining four months of the year after the swap operation. REUTERS/Cristina Silles
Although the first cut of information did not allow the officials to have the fine detail of the profile of investors who entered the conversion operation, they estimated that there was public participation through the Central Bank and the Sustainability Guarantee Fund (FGS) of Anses and reception in the private sector.
A detail: one of the bonds in particular had a lower acceptance percentage, of 37%, which contrasts with the 85% that there was in general terms. In the official offices they risked an explanation. And it is that the possession of that title in particular corresponds to investment funds from abroad that preferred to maintain their positions in the bonds with the previous conditions.
In 2023, 6.7 trillion pesos will expire. But the peculiarity is that 97% of that amount falls until September, so there are few bets for the post PASO months
The issue of external funds that pressure to get out of their positions in local currency has been a concern for a long time in the Treasury Palace, since the reading they do is that there are two institutions, mainly, that when trying to get out via “counted on liqui” generate noise in the foreign exchange market.
Massa will continue with his financial program at the same time that he will seek to adjust the spending pins in the public administration, in a process that began in the last few hours and will continue throughout the week. The secretary Raúl Rigo and the head of the advisory cabinet Leonardo Madcur held meetings with representatives of other ministries to establish budget ceilings for the remainder of the year.
Broadly speaking, the idea that began to spread from Economy to the rest of the ministries is that there will be no more funds available beyond what the budget decree that Martín Guzmán left a few days before leaving says. The detail is that this decree was made with an inflation calculated at 62% per year, while now a figure that exceeds 90 percent is expected.
The BCRA sold another USD 64 million in the market and has had a negative balance for 10 sessionsIncrease for pensions: due to mobility they would rise about 16% and a bonus will be addedMarkets: slight drop for Argentine stocks and bonds, along with losses in Wall StreetIncrease for retirement: due to mobility they would rise about 16% and a bonus will be added