Daniel Fernández Canedo
06/16/2020 - 18:43
The difference between the original proposal of Martin Guzman in mid-April and the current, which the government closer to an agreement with foreign creditors, would represent approximately US $ 12,000 million .
The calculation corresponds to the economist Federico Furiase, from the EcoGo consulting firm, and represents in theory having gone from offering bondholders US $ 41 to US $ 50 of net present value, for each sheet of US $ 100, discounted at a bond rate of 10 %.
Going from offering US $ 41 to US $ 50, starting to pay in 2022 instead of 2023, and reducing the discount, in addition to possibly granting a "sweetener" in cash or in a bond tied to cereal exports or economic growth, would imply resigning those US $ 12,000 million in capital and interest savings accumulated to 2028.
The distance between the original proposal and the one that is supposed to be the definitive one (they assure that President Alberto Fernández planted himself at US $ 50) falls short of the minister's original idea that it constituted the maximum that Argentina could pay, and opens a new question about the concept of "sustainability" for the country.
In the original version, being "sustainable" implied to stop paying for three years abroad to clear the horizon and leave room to expand domestic consumption based, supposedly, on an expansion of public spending. But the attention of the pandemic l coronavirus trastocó everything.
Economic sustainability goes down a very narrow path that could be summed up in reaching some debt agreement that allows the private sector to get credit abroad again at international rates, since it will cost the State much more to regain the confidence of the markets.
Minister Guzmán was the first to recognize that Argentina will not be able to return quickly to the international market despite the fact that an excess of liquidity is allowing neighbors to finance themselves at low rates to meet the costs of the pandemic.
From April to here and in 10-year bonds, they obtained financing from Paraguay paying 5%; Brazil, 4%; Peru, 2.8%; Chile, 2.5%, and Colombia, 3.1% annually .
The Argentine Treasury is far from being able to obtain financing at these rates. With a country risk of 2,555 points it would imply having to pay 25.55% above 0.75% of the interest on 10-year US bonds. An impossible cost .
Reaching an agreement with most of the creditors (there are experts who assure that at the rate things are going, they will be bondholders outside ), would allow thinking about achieving some "sustainability" to face an economic plan.
The debt agreement, beyond the fiscal cost, should open the door to define a path for reducing the fiscal deficit that the government says will be 5% of GDP and private analysts have reached 7% for this year.
Of course, issuing signals of fiscal reduction amid the attention of a pandemic that triggered public spending, and which forces it to issue the Central Bank about $ 250 billion per month, it is not easy.
The government has been increasing issuance and public spending while grinding pensions and endorsing quarantine a salary reduction in the private sector that further reduces the consumption of families very concerned about the future of their income.
A debt agreement may help improve expectations but they collided early with the official plan to expropriate the Vicentin cereal factory, which, as the analyzes of the experts have been showing, lacks economic basis and is only supported by the government's political ambition.
Fixing by "right" with creditors backed by the IMF and trying to expropriate Vicentin by "left" can serve as political compensation for the ruling coalition but greatly affects the possible reconstruction of economic confidence even though it is said to be an "exception" .
Without strident statements as it was in 2001, Argentina has been in default since May 22 when it stopped paying US $ 503 million corresponding to global bonds. As of that moment, the negotiations intensified to agree with the three groups of bondholders that concentrate 40% of the holdings of the US $ 66,000 million to be exchanged.
The next deadline is June 30, when Argentina would have to face another US $ 500 million from a maturity of the Discount bonds of the 2005 swap that would be very costly in legal terms to defaul.
The creditor voices heard from abroad anticipate that there would be an agreement, but from the government they make it clear that there are differences that cannot be overcome.
Although delayed and complicated by the attention of the pandemic, the need to reach an understanding gains space and, according to experts, no country is going into default for a difference of two or three dollars .
There is a coincidence that default would be the most costly even when the Central Bank is showing that it is holding the dollar at bay and, with changes in the stocks, has managed to clear the possibility of a sharp exchange rate jump in the short term, which, in the current context It would have added too much uncertainty.