08/02/2020 - 19:09
The countdown to the closing of the debt negotiation, this time, seems to be coming to an end: after evaluating the possibility of extending the term of the swap until August 28 -from the effective date of this Tuesday, August 4- the Government turns to confirm that "for now" the decision is to close this stage with the international bondholders.
Progress will be made with the new loan with the International Monetary Fund, which seeks to refinance the payments that must be made to the body itself, and also with the debt swap under local law, which last Thursday was sanctioned in the Senate and passed to Deputies.
Planted in the last economic offer, which implies the “maximum effort” to which Argentina is willing, according to government sources, both on and off the record, the possibility of extending, even after the low percentage of accession achieved so far , loses meaning.
However, the Government still has the possibility of extending the offer, if it so wishes: the term to notify and notify the bondholders and the United States Securities Commission (SEC) expires this Monday afternoon.
The keys behind this new official position, to maintain the closing date for August 4, can be summarized as follows:
1. Political decision: as well as having improved the offer and reaching up to US $ 53.3, when the "endorsed" by the International Monetary Fund is 50 dollars, also the decision to set the closing point of the negotiation for this Tuesday was adopted at the top of the Government. "Some think that you can continue pulling the rope, but the truth is that it is very tense," said an official source. The consultation was, specifically, about the difference that exists today with the bondholders: between one and another proposal the distance is about US $ 3, substantially less than the initial more than 25 dollars.
2. New offer to bondholders would be less: the change in logic in the negotiations will lead to the negotiation of a loan with the IMF, with the detail that within that program, in addition to the fiscal and monetary aspects that will set the course for The Argentine economy will include the issue of how many resources there will be to pay debt creditors under foreign law. The idea behind the official corridors is that the offer will be less than what was put on the table today: it is that while the initial proposal of April was made when the Fund predicted that the Argentine GDP was going to fall 2.3% this year, and even with more pessimistic projections, with a contraction that would reach 10%, the proposal was improved, that trend reached a limit and the logic should be different, they say.
3. Impact on the dollar: with an adhesion of around 35% of the offer, as Clarín published , the minimum participation threshold (50%) is not reached and, therefore, the exchange would not be valid as an operation , therefore, it would enter a “hard default”, according to the jargon of the market. Some officials acknowledge that the impact will be felt in the dollar, particularly in the cash with liquidation and others who "circumvent" the exchange rate, believe that the support given by the IMF will be important in sending a signal of support to the country.
4. Legal changes, yes; economic, impossible: after the last offer that Argentina formalized in early July, the Government recognized that economically it was the highest that could be paid. "We have made the maximum effort possible and an offer that is definitive on the basis of that effort," Martín Guzmán confirmed once again in an interview on Page 12 this Sunday. However, legally, there could be improvements, Guzmán himself admitted last week, as long as they were adopted internationally.
5. Provincial restructuring: there are several provinces that are waiting for the national government to close the debt swap to be able to launch their own restructuring, and many others depend on the result that is arrived at as a country. In a default situation, in case the negotiation closes on Tuesday 4 with a low adherence, they will end up negotiating on more real premises, read an official source in relation to the impact that would have on the provincial swaps.