As Ámbito advanced, The Government advances with its idea of going through part of the year 2025 without a new program closed with the IMF. The idea, anticipated in this column two months ago, maintained that there was the agency’s consent to accompany Argentina without putting pressure on the need for a new program in the short term.
Yes indeed. The organization let Argentina know that there could be pressures from the markets. According to conversations that he could confirm Scope, The Fund conveyed that it recognizes the value and understands the Casa Rosada proposal: to move forward with fiscal adjustments and reforms that guarantee the fiscal surplus, but, at the same time, “maintain” the political credit of President Javier Milei that an eventual devaluation would inexorably damage in the path of low inflation. On the other hand, the elections in the United States will take place next week, on January 5, which will mean that the new government will arrive at the White House in mid-February. Only then will we know about the change of authorities in the Treasury Department, vital in political support within the IMF.
Although this does not necessarily imply postponing the start of formal conversations with the organization for a new program, Minister Luis Caputo considers that it is not yet time to sit down at the negotiating table. The IMF has already warned him repeatedly that the “new money” would not imply a one-time disbursement, but would involve partial disbursements in exchange for meeting goals. As noted, the Government is afraid that a possible new agreement with the IMF will force it to devalue, with the consequent loss of political capital for President Javier Milei linked to a possible inflationary rebound. The IMF, on the other hand, considers that The Government should present a “suitable” program to be agreed upon with the staff and subsequently approved by the board: in fact, this has not yet happened, hence the speculation.
Country risk falls: more variants to face maturities
On the other hand, the Government trusts in a dynamic that would enable new alternatives to advance on the financial front. In the last few days, The rise in Argentine sovereign bonds was strengthened by the announcements of new loans from multilateral organizations for US$8.8 billion and the proximity of a loan (REPO) with a consortium of banks, which led to an additional drop in the country risk to the area of 914 basis points.
In fact, as Ámbito learned, The Government is not only now evaluating a short-term loan for about US$2.7 billion that will allow it to pay upcoming capital maturities, but also a virtual debt exchange that will allow it to clear amortization payments for securities maturing until 2030.
The improvement in the prices of public securities has prompted other variants to be analyzed, where some debt issuance under certain particular characteristics is not ruled out. It must be remembered that The opportunity to exchange debt was enabled in recent weeks when the legal conditions to carry out debt exchanges in foreign currency via DNU 846/2024 were made more flexible. which allows the Executive to restructure debt in foreign currency without complying with the requirements established in the Financial Administration Law (LAF). This effectively implies that it is no longer necessary to achieve two out of three possible improvements in terms of term, interest or capital reduction to carry out a debt exchange. Minister Luis Caputo knows that in order to extend deadlines he will have to offer a more profitable instrument for the investor.
More coupon in exchange for a longer term: the luck of the AL30
The Government understands that the most important exchange is the one that should be carried out with the instruments whose maturity begins to pay capital installments, especially those that expire in 2030whose amortization is around 8% of capital every six months, which, in the opinion of the economic team, are significant amounts and have practically no coupons. That would give a chance to extend the deadline and raise coupons.
At the request of Ámbito, a calculation carried out by an expert stated that For each year that the Government sought to extend the 2030 bond, it would pay an additional 1% coupon. That is to say, the capital you have left from 2030 is taken to 2035 and should add a coupon of 5% (it is added to the coupon you have now). The market considers that the rest of the debt does not represent major challenges going forward, since the restructuring of former minister Martín Guzmán has left “low coupons and long maturities.”
More entities could join the repo: the improvement of the bonds
The minister himself announced less than a week ago – but did not make it official – that Argentina obtained a loan of almost three years with private banks, in REPO format, to face the payment of debt capital to bondholders in January. In addition, he announced that “if interest rates allow it,” he will seek to return to the international credit markets to refinance the maturity date next July. The loans negotiated by Caputo are credits known as REPO (repurchase agreement) in which the Bonds for the Reconstruction of a Free Argentina (Bopreal) issued by the BCRA could be placed as collateral.
The head of the Treasury Palace gave an interview to the British newspaper Financial Timesthe same day that LatinFinance magazine distinguished him as “finance minister of the year”. In that meeting, he admitted that the agreement with the IMF will remain for next year, after the new US government takes office in January. On November 5, Republican Donald Trump and Democrat Kamala Harris will face off in the presidential elections.
The minister specified that most of Argentina’s debt obligations due in 2025 mature in January and June, with almost $5 billion in interest and principal payments to bondholders in both months. By January, Luis Caputo said the government has already deposited cash in the Bank of New York to pay interest and has reached a nearly three-year repurchase agreement with the banks to pay the principal. “In June, interest rates permitting, we will refinance the principal and pay the interest using our primary surplus,” Caputo said. And he explained that “if the conditions are not met, we will make payments in another way.”
Argentina will face debt maturities with bondholders for US$4.8 billion next January, according to the estimate made by the Congressional Budget Office (OPC). Of that amount, about US$1.7 billion corresponds to interest and was deposited in advance by the Treasury in the Bank of New York. Its duration would be almost three years, Caputo told the Financial Times.
Source: Ambito
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