As of today, the bond exchange that obliges public bodies to dispose of their holdings of dollar bonds to contain the pressures on financial currencies and absorb pesos. But what do the two published DNU say about the operation?
1. DNU No. 163/23 explains the general framework of the operation where public entities are forced to exchange their bonds in dollars for titles in pesos for an amount of US$4,334 million in a 10-year term. These bills will accrue an interest rate equal to that accrued by the Central Bank’s reserves for the same period. The interests would be canceled semi-annually and the subscription of these bills would have to be integrated into Special Drawing Rights (DEG).
As is well known, SDRs represent a potential claim against the freely usable currencies of IMF member countries. Once allocated, SDRs can be held as part of international reserves or they can be sold or used in whole or in part.
2. In one part of the DNU 163/23reference is made to the “urgency” of the measure with the following words: “that the urgency in adopting this measure makes it impossible to follow the ordinary procedures provided for in the National Constitution for the enactment of laws.” Although the DNU are taken in an “exceptional” manner, they must then be approved by the National Congress. If Congress were to reject the DNU, the Executive Power must modify the circumstances that Congress took into account to decide the rejection.
3. Another important point is the role of the Ministry of Economy in this operation. “Payments of interest services and principal amortizations of bills dominated in dollars will be replaced by new public titles whose conditions will be defined jointly, by the Ministry of Finance and the Ministry of Finance, both dependent on the Ministry of Economy”.
The details of the second DNU
He DNU 164/23 seek to deepen the measures aimed at consolidating the path of the economy through the “strengthening” of the macroeconomic order and ensures that “it is also necessary to reinforce the general improvement of expectations through policies that allow us to provide greater exchange and financial certainty in the short and medium term.”
What were the reasons used by the Ministry of Economy to make this decision?
- To reinforce the improvement of expectations through policies that provide exchange and financial certainty in the short, medium and long term.
- Avoid extreme volatility in the exchange market due to its effects on inflation and the “economic life of the population.”
- Guarantee the financing of the Treasury and the sustainability of the public debt.
The Ministry of Economy undertakes to: “strengthen the consistency of fiscal and monetary policy, in such a way as to reduce exchange and inflationary pressures.”
- Clears compliance with the 2023 financial program
- Greater availability of instruments to stabilize the markets and absorb possible surpluses to contain inflation.
- “Rearrangement of financial assets” especially those denominated in dollars.
It also adds: “The sales or auctions will be carried out by the entity determined by the Ministry of Economy under the terms and conditions that it provides, on behalf and by order of the aforementioned organizations.” In another article, he maintains that the bonds in dollars must be delivered in exchange to the National Treasury for the public titles issued, ”he explains.
And he adds that it will be the Economy that defines which organizations will be subject to this exchange, although it is estimated that they will be the ones with the most titles in dollars.
According to the regulations, the agencies and jurisdictions that participate in the operation “must subscribe national public titles payable in pesos” from the Treasury “for a effective amount equivalent to 70% of the product they receive the sales operations of their holdings of public titles denominated and payable in US dollars.
In addition, public bodies must also sell bonds in dollars under local legislation, known as Bonares -such as AL30, AL35 and AL38-, in the private market. This would provide liquidity to the financial dollars and would allow the prices to fall and thus lower the price.
Source: Ambito

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