The drought has strengthened a context of shortage of dollars that Argentina suffers and it is estimated that this year they will enter about US$20,000 million less. Faced with this situation, the Central Bank (BCRA) It has been taking different restrictive measures for access to the official exchange market for different economic sectors and this time it was the turn of the provinces. And it is that, for debt payments in foreign currency, the monetary regulator will allow access to the official exchange rate only for 40% of the total amount of maturities and the provincial governments must refinance the remaining 60% or settle it with their own funds. .
According to official data, the global debt involved is US$460 million, which is the amount of capital maturities that will occur in the second half of the year, while US$315 million have already been paid in the first semester. That is to say, that what is requested to refinance is 60% of the total, it would be US$276 million.
“This implies that the provinces must access an exchange rate that is worth almost double the official one because they have to go to the financial dollar to pay their debt,” he points out to Ambit Nadín Argañaraz, economist and president of the Argentine Institute of Fiscal Analysis (IARAF). Each province will evaluate, according to its conditions (whether it has resources or not), how it will face the maturity of its debt to from this measure of the Central.
The provinces most affected by the measure
However, he points out that the most affected provinces will be those whose capital maturities in hard currency are high with respect to the income they receive because they will have to access a dollar of greater value and the incidence will be stronger.
Official sources assure that, after supporting the economy and making efforts to control the price of the dollar without asking the provinces for anything, now, “the governors are being asked to make an effort” and they maintain that no province is being taken to a critical situation. They consider that what is being asked of them are able to comply.
On the other hand, according to Argañaraz, the BCRA rule leaves room for assistance if any province cannot access it, but the rule is that they must find a way to pay off that 60% maturity of capital.
The gap, a problem for the BCRA
And it is that, one of the big problems that the BCRA seeks to solve is that the current currency gap It is very broad and encourages all public or private agents that have access to the official market to borrow in dollars and pay through the single free exchange rate (MULC) at a much lower price of $245 per currency.
However, behind this problem, another deeper problem is hidden, which is the fact that, during the administration of Cambiemos in the national government, indebtedness in dollars was promoted in all stages of government and this was a problem.
Debt dollarization: a problematic legacy
“The previous government borrowed in dollars from the International Momentary Fund (IMF), but also invited the provinces to finance themselves in foreign currency,” says economist Hernán Lechter, director of the Center for Argentine Political Economy (CEPA). He explains that, instead of financing public works from the National State, they encouraged national governments to borrow dollars.
It even indicates that there was an armed device from the Cabinet Office for the provinces to manage these debts. This created a big problem for many of them, because, being in dollars, they ended up increasing their indebtedness with the devaluations of 2018 and 2019. “That is why the debt of Córdoba, Salta, Buenos Aires and several provinces took a phenomenal leap ”, he maintains.
The big problem is that several provinces have to face maturities in the coming months and that is why the presentations of amparo appeals did not wait. The first provincial government that reported that it was going to advance in this direction was that of Córdoba and a few days later, Mendoza also announced its decision to follow the same path.
This is the accumulated debt of the different provinces:
New appeals are expected
So, Argañaraz does not rule out that “more provinces, mainly those of a different political character from the Government, present legal actions tending to make the BCRA have to give them the dollars. Likewise through some amparo remedy”. However, those actions take some time and some may have to make payments before judgment arrives.
The most affected provinces will be those whose capital maturities in hard currency are high with respect to the province’s income because they will have to access a dollar of greater value and the incidence will be stronger.
Source: Ambito
