The opposition questioned the government’s plan to exchange the debt in pesos: “It is a huge risk”

For Together for Change, the official proposal is “exchange insurance for bondholders”

The opposition questioned the government’s intention to carry out a new exchange of bonds in pesos to extend maturities to 2024, an initiative that the economic team has been working on with banks and insurance companies in recent weeks.

“The legislative blocs of Together for Change warn about the serious risks involved in the debt swap being prepared by the Ministry of Economy,” they began their criticism from JxC in a statement released this Sunday afternoon.

“The aforementioned exchange will give banks an option that no investor has: a ‘dual bond’ adjusted for inflation or devaluation and the possibility of selling all the titles to the Central Bank at any time.”

“This implies exchange insurance for bondholders and that the debt that expired every three months now, in practice, has daily maturities. All of this extended until 2024,” the statement continued.

“This action will pose a huge risk for Argentines, since it could lead to an inflationary jump even greater than the one already produced by this government, in addition to generating serious problems for present and future economic management,” they asserted. “This interference constitutes a violation of the principles of administrative law and the BCRA’s own Organic Charter,” they closed.

The main opposition coalition had already expressed its questioning of the debt management during the Frente de Todos government on previous occasions and even spoke of a “bomb” when referring to the maturity profile of the bonds in pesos that the current mandate could leave. to a government of a different political sign after the presidential elections.

The Secretary of Industry José de Mendiguren came out to respond to Together for Change

“The National Government does nothing more than speculate with leaving a time bomb for the next Government,” said a statement from JxC a little less than a month ago. “During the government of Alberto Fernández, public indebtedness had a record increase: it already grew by the equivalent of USD 83 billion, which generated a financing crisis in pesos that had its epicenter in June 2022. Since then, the Bank Central was forced to buy public debt for the equivalent of 2.3% of GDP, circumventing the limits on financing to the Treasury established by its Organic Charter” and they questioned the “successive debt swaps” that seek to “make up” the situation in order to to “avoid a new default or a greater monetization of public debt”.

Minutes later, representatives of the Renovation Front came out to answer the statement. “The defaulter believes that everyone is of the same condition as him. They led the country to default in 2001. They led the country to default (in pesos and in dollars) in 2019. Tell people the truth: they are going to default again because they already did it,” said Secretary of Industry José Ignacio de Mendiguren .

For his part, the director of Banco Provincia Sebastián Galmarini, also on Twitter, fired: “Say it without shame! They want Argentina to explode not only because of electoral speculation against the government. They also do business. They want the debts in pesos not to be paid, the currency to be devalued and inflation to get out of control, at the same time that the salary loses value, ”he criticized.

The proposal that they have just defined in Economy in the round trip with banks and insurance companies, as reflected by Infobae, would include a basket made up of 80% inflation-indexed securities and 20% dual bonds, which it offers to holders exchange and price hedging in pesos, according to what ends up being the most convenient for the investor.

Maturities for the coming months amount to more than 12 trillion pesos between March and July and 16 trillion until October. According to an estimate made by the consultant Equilibra, “if we look at the dynamic maturity profile (projecting the evolution of the CER and the exchange rate until the maturity of each instrument) more than 16 trillion pesos must be paid (10% of GDP ) between March and October”, they estimated.

Not all of this amount is in private hands, so it is discounted that a relevant part, which is part of the investment portfolios of the public sector itself, will enter the proposed exchange. “Banks, both public and private, would be willing to enter into this exchange, which would guarantee the conversion of more than 70% of the holdings,” Equilibra estimated.

Keep reading:

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