Let my love shine, said Fabiana Cantillo, the dollar does not stop shining while debt rises and we don’t have fiscal surplus. The weight pales in this context.
The debt as of August 31, 2023 measured in dollars decreased to US$ 392,906 million, when as of December 31, 2022 it stood at US$ 394,048 million. This improvement was due to a liquefaction of the debt in pesos, which, measured in dollars, was reduced given the sharp jump in the wholesale exchange rate in August, which went from $177.13 to $350, with an increase of 97.6 % in 8 months.
Broadening the focus and looking at the debt from December 2019 to date, the debt measured in dollars grew by US$ 72.38 billion, which is equivalent to an increase of 17.9% in dollars. This growth makes the debt unpayable if it continues to grow at this rate. Let us remember that Argentina does not have a fiscal surplus, which makes this level of debt unsustainable.
15.0% of the debt is in pesos at a fixed rate, this is the only debt that can be liquidated with a devaluation. 17.0% of the debt in pesos adjusted by CER and 68% of the debt in dollars cannot be liquidated with a devaluation of the monetary sign. 85% of the debt requires a great effort to reduce it.
As Argentina has a fiscal deficit of US$20,000 million per year, the debt of US$392,906 million is impossible to pay. For our bonds to recover 100% parity, we should have at least fiscal balance, and hope that the higher inflation in the United States will allow us to repay the debt more quickly in the future.
If we measure the debt in pesos for the same period of time, we have that the debt in pesos at a fixed rate grew by 638%, the debt in pesos adjusted for inflation grew by 1,509% and that the debt in dollars nominated in pesos grew by 525%. . The total debt measured in pesos grew 616%.
Measured in local currency, this debt is also unpayable, as fiscal accounts show a deficit of $5.7 trillion.
Inflation between the month of August 2023 and December 2019 was 621%, with which we could say that the public debt, measured in local currency, grew entirely at the rate of inflation.
. – The public debt can be considered sustainable, the day Argentina achieves fiscal balance, for this it needs a surplus of US$ 20,000 million or $ 5.7 trillion.
. – To achieve fiscal balance Argentina needs to readjust the relative priceswith a strong adjustment in public rates, and at the same time readjust the price of the exchange rate. This can lead to a hard recession that affects public income, and postpones budget balance over time.
. – Without budget balance, the Sovereign bonds They could grow in price, but in no way would they reach a value close to parity. For them to rise from price to parity value, they inexorably need a minimum budget balance.
. – So that we see sustained growth in the value of the Actions we need a lowering of the risk countryand therefore for bonds to rise, without fiscal balance we will not have the long-awaited bullish rally that places us at values of the Merval index close to those achieved in 2018. Bullish Argentina does not exist in this context.
. – Until we have a serious reform program in the State, the investment that will never stop shining is the dollar, and the one that will perform the worst will be the peso. Buy dollars, and you will not regret it.
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