07/28/2020 - 19:20
Since the fourth and for now last offer of the Argentine government to the bondholders was known, on July 6, President Alberto Fernández and Minister Martín Guzmán have been insisting that there will not be a fifth offer , that this is the final one.
The statement was repeated even after the rejection of a large group of bondholders this week. For some reason, this lack of agreement did not lead, for now, to a collapse of the bonds or a surge in alternative dollars or country risk. The three dollars difference that separates the debtor from the creditors is considered for the moment insufficient to definitively give up the negotiation.
It is difficult to understand the government's position of stretching the negotiations instead of closing the deal now. Nor is much understood the appeal of Minister Guzmán, in the statement last Saturday, to 50% of Argentine boys and girls who are below the poverty line, as a sufficient reason to reject the bondholders' proposal.
One might wonder what would happen to these boys and girls, and retirement, and economic activity in general, if the debt negotiations broke down and the government chose to close the deal with a low percentage of bondholders, opening the way to lawsuits. and holdouts. In fact, it is easy to deduce what would happen with the exchange rate, with the exchange gap and with inflation.
There is an objective fact: the Government has already won. Even if you agree to grant one, two or even the extra three dollars that the bondholders are claiming, you are assured of resounding success.
Federico Furiase, from Eco Go, puts it this way: "Taking the offer of the bondholders, which implies an average net present value of 3 additional dollars to that of the Government, the average coupon would be falling from 6.7% to 3.4% and capital and interest savings compared to the current profile would reach $ 35 billion in nine years. " In this scenario, Furiase continues, "the Government would more than compensate in economic and political terms the extra fiscal effort that it would have to make now to close an agreement without holdouts."
Although the capital of the renegotiated debt is marginally reduced, the interest payment falls, since there is an impressive cut in the interest coupons. And on top there are no relevant payments during the remainder of this presidential term.
In the market, it is commented that today the objective differences could be closed by just raising the coupon of the bond with which the interest is paid and running some payments in advance. The discussion about the legal fine print of the operation already seems to be almost settled.
The day after avoiding the default, Argentina would be paying interests similar to those paid by countries considered “investment grade”. Given that Martín Guzmán accepted that the Government will not go looking for new funds in global markets, it should not validate the interest rate that the market will want to charge in the first months after the exchange for the placement of new dollar bonds.
The arrangement would be a relief for private companies that do need to access the international capital market, either to refinance in debt terms for some 16,000 million dollars , or to get fresh silver to develop new investment projects ( Vaca Muerta?) , which may generate value-added exports or new jobs. What's more, with a debt settlement, how much would the value of Argentine companies grow . How much the equity of the Sustainability Guarantee Fund (FGS) administered by Anses? All "titles" that the government communication team could use to their advantage.
What's more, the minister already has material to write his successful debt restructuring case. Understandable why you choose to stretch the negotiation so much. Guzmán, a confessed fan of Gymnastics and Fencing of La Plata and Diego Maradona, should accept this time one less gambeta and a bit of bilardism to ensure the result.
It has everything to win. And the next day (more bilardism), present your economic plan .