The former Minister of Economy was very critical and warned that next year some US$3 billion must be amortized in January and a similar amount in July.
The decision to modify by DNU the conditions for carrying out exchanges in Argentina put into question, according to some analyses, the Government’s ability to honor capital obligations of almost US$6 billion in 2025. This is what the former Minister of Economy said Martin Guzman, for whom “What the DNU does is increase the suspicion that they are trying to change the maturity profile of the debt. The next milestone is January 9 because there is a capital maturity, and July would be the next. What they would seek is to kick them to later at any cost,” He indicated in a conversation with journalists.
Reference maturities are one that operates on January 9, for approximately US$2.898 million, and another for the same amount on July 9 of next year. With the Decree 846 published in the Official Gazette this Monday, concern is growing over the possibility that the economic team could not be in a position to refinance those maturities in the voluntary debt markets.
In that scenario, and assuming that from the Finance Secretariat in charge of Pablo Quirno If they had to exchange bonds maturing in 2025 in a restructuring operation to postpone maturities, they could face a higher rate in the market between 15% and 20%, According to the analysis of the former official.
Debt: the reasons given by Guzmán
The former minister, author of the last exchange, points out that The current Financial Administration Law prevents the Executive Branch from assuming market rates in operations with dollar bonds. For this, you should ask for authorization from the Legislative Power. It should be remembered that although Current bonds pay 3% interest per year, and since they are worth about half their issue price on the market, that rate becomes 16% per year, In the case of GD38, the former minister’s reasoning is that if Luis Caputo wanted to postpone the GD30’s maturity to 2038, he would have to assume that new rate.
“There is no market access to interest rates that reflect a sustainability profile,” he explained.
Guzman said that “this is an implicit exchange although the fact that they don’t call it that may have to do with the fact that The risk rating agencies penalize the exchanges, since they are associated with rating downgrades,” he explained.
The former official said that “you can do whatever operations you want but If the country does not have the capacity to generate foreign currency, the debt profile will not improve.”
Guzman’s hypothesis is that if Caputo opens a debt swap For the US$6 billion that matures in 2025, it would assume the full market rate in a negotiation with bondholders. That is to say, the current head of the Treasury would not seek to pay a lower rate.
That’s why, He warned that the DNU “has destabilizing consequences for the economy because carrying out operations of this type leads to the debt burden becoming ever greater.” “A higher primary surplus is necessary to be able to service the debt. This has an impact on the macroeconomic situation and reduces economic activity,” he said.
Source: Ambito
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