In 2024, Argentina is consolidating a debt reduction and a fiscal surplus, A great time to invest in sovereign bonds, whether in dollars or pesosThe consolidated debt of the public sector, plus the debt of the Central Bank, can be viewed from several places, namely:
– If we look at the Treasury debt from December 2023 to July 2024, we can say that we have a debt stock of US$ 449,617 million, which increased by US$ 81,392 million. Of course, we would not be incorporating the Central Bank’s debt into the analysis and we would be looking for a negative view.
– If we look at the treasury debt and compare it with the month of November 2023, since in the first 20 days of government President Javier Milei carried out a devaluation that liquefied the debt in pesos and lowered it significantly, we would have a headline that would say that the debt rose by US$ 26,570 million.
. – If we were to carry out a more realistic analysis, consolidating the debt of the BCRA and the Treasury, we would say that the debt stock as of July 2024 amounts to US$ 459,596 million. If we compare it with the base of December 2023, we would say that the debt as of today amounts to US$ 55,868 million.
. – If we compare the consolidated debt of the BCRA and the Treasury with the month of November 2023, we are in a position to affirm that the debt decreased by US$ 28,419 million. In this case, you would be accused of being an official.
Each economic commentator will stop somewhere different; however, from our point of view, we must take the consolidated debt of the Treasury and the BCRA, comparing it with the month of November 2023, with which the debt in Javier Milei’s government decreased.
It should be noted that, of the total debt stock as of July 31, 15.8% is debt in pesos, which could be liquidated with a devaluation. The debt in pesos adjusted for inflation represents 26.8% of the total. The debt in dollars represents the remaining 57.4%. From this it follows that a devaluation would directly or indirectly affect 84.2% of the debt.
Based on these analyses, it is clear that it is not in the government’s interest to devalue if it wishes to honour its debt and generate intertemporal sustainability of its economic programme. It should be noted that, with little external credit, almost non-existent, the government is paying the debt, and that is why we see a substantial decrease in the debt denominated in dollars.
According to our records, comparing the debt between July and November, this is the picture we follow.
This table clearly shows the reduction in Central Bank debt, which was transferred to the Treasury; a decrease in debt in dollars and an increase in debt in pesos, especially in the debt adjusted by CER.
What’s next for the economy
5 points to follow in the next 60 days to see the evolution of the economy are as follows:
1) The result of the bleach, This will bring the Central Bank a significant stock of dollars, an increase in tax collection due to the fine effect and, in the future, a larger tax base for fiscal income. It is estimated that US$ 30 billion will be declared, we will see.
2) The result of the moratorium tax, very generous, which ends in September 2024 and is paid in just 3 installments, this would generate a flow of funds that would allow the Treasury a greater fiscal surplus and, consequently, more purchase of dollars that would increase the reserves.
3) The result of those who adhere to the benefit of paying in advance 5 years of Personal property, a large adhesion is estimated due to future benefits.
4) The results of the privatization total of Enarsa and Intercargo, as well as the partial sale of AySA, the Río Turbio Coalfields and the Argentine Electricity Core. Belgrano Cargas y Logística, the Railway Operating Company and Corredores Viales are companies subject to privatization or concession.
5) The implementation of the RIGI (Large Investment Incentive Regime), in this case there are no measurements, but the minimum investments are US$ 200 million.
If we have good results and, out of these five points, the State manages to strengthen the fiscal surplus, reinforce reserves and generate more investment in the economy, we would have an improvement in the cash flows that will allow the debt to be repaid with fewer problems. This should give room for a reduction in country risk and a significant increase in sovereign debt in dollars and in pesos adjusted for inflation, which is our preference.
While the market is full of binary forecasts, some apocalyptic, others extremely naive, we are inclined to think that the government has a great chance. to achieve a large tax collection and enter better position in 2025. This does not imply that the difficulties to get out of the corralito or to reach an agreement with the IMF in the remainder of the year will be eliminated, tasks that will remain pending to be carried out during the course of 2025. The country risk pierced the level of 1,500 points, it is very likely that, if good results are achieved from these 5 points, the country risk will drop to levels of 1,200 points, as it has been in the recent past, or will exceed that mark on the downside. Argentine bonds, both in dollars or pesos, are a great opportunity to make money in this situation.
Financial Analyst
Source: Ambito
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