The Central Bank resolved last Thursday in a new meeting of the Board of Directors, to apply a series of restrictions on access to the dollar for debt payments in that currency of provinces and municipalities through an extension of the criteria currently in force for the payment of Negotiable Obligations (ON) in foreign currency issued by companies. Within this framework, three provinces filed a formal claim against the Central Bank and one of them has already anticipated judicial measures.
According to BCRA Communication A7782, As of June 2, the financial regulator will require provinces and municipalities to pay 60% of their debts in foreign currency with their own dollars and will be able to access the official exchange market only to pay the remaining 40%.
The first to raise his voice was Juan Schiaretti, the Governor of Córdoba who is risking his candidacy for President. The interesting thing about this debate after the measure of the Central Bank is that it equals the exchange treatment to the provinces with the one that private companies already received.
“The provinces that, for the most part, had restructured their debt in 2020 and now, in some cases, began to face capital maturities, would have to decide between seeking new financing in hard currency for no less than 60% of the capital that matures. , or carry out a debt swap for an amount equivalent to the indicated parameter, or – implicitly – get or use foreign currency to meet the remainder without accessing the official exchange market,” says a report by the consulting firm Quantum, headed by economist Daniel Marx .
Within this framework, in addition to Schiaretti, the governors of Neuquén and Mendoza, Omar Gutierrez and Rodolfo Suarezagreed to reject the measure imposed by the national government, despite the fact that the organization’s difficulty in increasing reserves and managing scarce resources is already known.
A worrying report
Quantum’s report specifies that for the seven months remaining until the end of the year, principal maturities for issued securities reach US$443 million (net of capital payments for Salta, a province governed by the recently reelected governor Gustavo Saenz, which paid a maturity on Thursday 1), with which the provinces must procure US$266 million. Interest payments due in the period for these instruments total USD 505 million (also net of the Salta maturity). In addition, there are other obligations abroad instrumented under loans.
The provinces with the highest maturities in the remainder of the year are Buenos Aires and Cordoba. The Mediterranean province, which decided to present an amparo before the Justice, is the most committed in terms of term, warns Quantum, since on June 10 it must pay an amortization of US$ 120.3 million. Mendoza also announced that he will resort to Justice and Neuquén also expressed his dissatisfaction with the official measure, although it is not certain that he will interpose some type of measure.
Why was it called the Fernet Dollar?
The first to speak on the subject was Lisandro Nieri, former Minister of Finance and current national deputy for Mendoza who referred to “Dólar Fernet” as a way of titling the claim that the provinces are making due to the resolution of the Central and, as previously stated, Córdoba is the most affected.
For the Mendoza, the new measure could be called “Fernet Dollar” and added to the list of exchange rates. He affirmed then that everything is “for the whim of not starting to deactivate this exchange-rate jerk.”
On Thursday, when the BCRA announced the measure, the hardest-hit provincial papers were those of the Province of Buenos Aires with falls of 2.6% and those of Córdoba, whose prices fell 1 percent. “The rest of the jurisdictions did not show significant variations, presumably due to the low liquidity with which they operate,” explains the Quantum report. The official measure seeks to force the provinces to use dollars that they have hoarded and that – official sources slip – add up to some US$ 1,400 million.
Source: Ambito
