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To achieve an agreement on the debt, the Government changed its attitude and put on the table US $ 16 billion more

2020-07-12T03:54:39.318Z


The figure comes from comparing the first offer to bondholders with the last one. Will this be the final proposal or will there be another round? In addition to improving its proposal, the Casa Rosada softened the speech, because after seven months of negotiations, the need for an agreement is increasing.


Daniel Fernández Canedo

07/11/2020 - 13:18

  • Clarín.com
  • Economy
  • Economy

" Under the last offer, US $ 16,000 million more will be paid in the next 10 years than what would have been paid with the first, and that is the fiscal cost of improving the government's final offer to creditors ."

That is one of the conclusions of a recent report by the ACM consulting firm that compares the two points of the proposals of the Minister of Economy, Martín Guzmán(so far there were four), which can be summarized as the exchange of bonds started with a price of US $ 41.98 for each sheet of $ 100 and went up to US $ 52.35.

That financial journey occurred simultaneously with a change in the tone of the Government's speech, which was from the ministerial objective that this exchange be a model to change the international architecture for the treatment of the debt of developing countries, to calm that President Alberto Fernández sought to generate in a group of businessmen on July 9, telling them that the closing of the negotiation was near.

The Government put on the table the proposal for the exchange until August 4, and will have another 30 days to receive accessions. On average, it needs 66.67% to accept exchanging the bonds for longer-term ones, which, it is understood, will be less risky from a new payment commitment.

Beyond the numbers and the evident change in tone ("we want to reach an agreement," said the minister, referring to BlackRock , the largest fund that asks Argentina to pay more), the need to reach a point gains importance.  end of the negotiation after seven months of negotiations.

To the uncertainty about the evolution of the coronavirus pandemic and the extension of the quarantine that have been giving an unprecedented blow to economic activity, the prolonged negotiation for the debt continues to be added.

Now the cards are turned over and the positions are clearer, to the point that, inside and outside the Government, it is considered possible that the agreement with the bondholders is partial and could lead to another exchange at some other time. But within another framework.

Both the Government and BlackRock sweetened their words to be considered "good faith" negotiators should they have to bring their differences to the courts of Judge Loretta Preska in New York.

The Minister of Economy, Martín Guzmán, in his office.

President Alberto Fernández faces too many emergencies. The attention of the coronavirus, a new round of IFE bonds to serve millions of Argentines in a situation of poverty that will involve another round of issuance of $ 90,000 million , the banderazos for the release of ex-officials and businessmen linked to Kirchnerism prosecuted in causes of corruption, are some of the problems that are added to the need to close the debt swap.

In addition, with the additional that the closing of the negotiation with the bondholders is the initial kick-off for the Government to present a plan on how it intends to manage a fiscal deficit that is projected above 6% of GDP after having ended 2019 below from 1%.

For the Government, the economic challenge is enormous . On the one hand, very bad data on the drop in activity due to compulsory social isolation (18,546 companies closed in two months with a drop of 284,821 jobs) come to light and the answer is to arrange the third round of $ IFE bonds. 10,000 - for 9 million inhabitants - financed with issuance in the face of falling revenues and the absence of external credit.

On the other hand, the decline in the population's income, which the IFE only partially compensates, does not allow for a rapid recovery in consumption .

In this difficult context, soybean rose to US $ 350 and appears as a new opportunity that adds to very favorable international financial conditions for developing countries.

The cost of financing worldwide is still around zero (United States Treasury bonds pay 0.6% annually) and neighboring countries, such as Uruguay, manage to fund less than 4% annually .

The global financial window is open for the region and, in this context, Argentina could take advantage to clarify a message to investment, which remains very blurred.

LGP

Source: clarin

All business articles on 2020-07-12

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