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Massa, in 'aggressive' mode: sacrifices dollars to contain exchange rate pressures

2023-01-18T17:22:40.696Z


Officials believe that the measure impacts financial dollars and Country Risk. Doubts about the cost among analysts.


Determined to calm the exchange tensions

after eight consecutive rounds of rises in the blue, the Government decided to

send a signal to the market

and pointed all the guns

at the fall of the dollars

.

With this objective, the Minister of Economy, Sergio Massa, announced on Tuesday the start of the repurchase of external debt for US$ 1,000 million, an operation that had a positive impact on the dollar bond market, with increases of up to 11% and a bridging of the gap.

"We have made the decision to carry out a repurchase process of the

Argentine external debt for more than 1,000 million dollars

that begins today

," said Sergio Massa today at 9 in the morning, prior to the opening of the markets.

The blue hit a new nominal record of $378 yesterday, a

level that began to cause concern

in the halls of the Palacio de Hacienda and forced a reaction from the economic team.

In Economy offices they confirmed at least two purposes:

the reduction of the exchange gap

(today, between 92 and 107%) and

the cost of financing reflected in the Country Risk

, which today dropped to 1881 points.

"The measure should benefit and lower the parallels, it should have an impact on the financiers, the CCL and the MEP, where you have the bond and dollar market mixed, and we are already seeing a drop in Country Risk," they assured close to Massa.

Specifically,

the Treasury ordered the Central Bank to repurchase titles under foreign law

, in principle Global 29 and Global 30, in the secondary market.

The "liability strategy", whose initial amount and terms were not specified, will be for a total effective value of up to US$1,000 million, equivalent to between US$2,500 and US$2,700 million at face value.

And it will be financed with "dollars" deposited in a Treasury account. 

In this way,

the Government seeks to get hold of bonds at convenient prices

and aims to carry out an "indirect intervention" to expand the offer in the exchange market with the injection of foreign currency.

"Both markets, bonds and exchanges, are somehow connected, it is effective to reduce the gap to the extent that it is reinforced with other measures that increase the supply of currencies and improve confidence," sources close to the Economy explained.

In a sign of coordination, the Central Bank accompanied the announcement with the rise in the interest rate for banks (for passive repo operations with a term of 1 business day from 70 to 72% and active operations with 1 business day of term from 95 to 97%).

The entity authorized the adjustment in an attempt to shore up the drop in the parallels, after keeping the reference rate unchanged since December, despite the acceleration of inflation in December to 5.1% per month.

The measures were well received in the market

, where, however, doubts persist about the capacity to accumulate reserves and the resources available to add expenses.

"Aggressive, as always Massa, reasonable," they said in a private bank.

"I think it's going in the right direction but that the market is going to do the numbers together with what is missing in dollars from the drought," they indicated from a portfolio of funds.

In the Treasury, they explain that the measure was taken now because it was "convenient" to buy them at current values

, as part of the reordering of the debt curve in pesos and dollars, without ruling out a future REPO with foreign banks.

While in the financial sector the announcement was read as a response to "previous leaks", which could have fueled the rally started in September by dollar bonds and stocks.

One of the unknowns is the cost of the operation

.

Massa's team maintains that

the use of reserves will not affect the goal

with the IMF because it would only affect gross reserves as they are the Treasury's own resources.

And, in terms

of spending, they say that it will be offset by savings

from lower energy imports and the reduction of energy subsidies.

Massa stated that there was an "overachievement" of goals in 2022.

"This is a first step of 1,000 million dollars. Very focused on the global ones, especially the short-maturity ones; 29, 30. We understand that this is where we have to attack for the best debt management, the debt profile and Argentina's maturity profile," said the Economy Minister in the morning from the auditorium on the fifth floor of his ministry, without the presence of the press.


But

analysts believe that the amount of the operation will be less

.

"It is to give a framework that justifies the intervention to lower the dollar MEP and CCL, I doubt that they will repurchase 1,000 million. It seems to me smoke to scare and keep the dollar at bay with two pesos (or two dollars). It has no reserves, and the IMF does not It allows you to use the reserves like this and less if you don't have them. They sell it to you as debt restructuring and repurchases," said a former Central Bank official.

"I don't know where they are going to get the resources from,

neither the BCRA nor the Treasury are in a comfortable position to buy debt

, it is true that it is beneficial to improve the debt profile, but it is not credible due to the capacity of the public sector in general If there are no dollars, are importers not going to complain? And does the Treasury have deposits to pay interest to the IMF and buy back debt? Rare," said Guido Lorenzo, director of LCG.

For Isaias Marini, an economist at Econviews, the repurchase

"probably has a limited direct effect on country risk,

but due to contagion in the market it could lead to a further decline, and this is reflected in the rise in dollar bonds that are registering increases of up to 7% after the announcement. But it also implies a formalization of the mechanism to intervene in the gap".

"In terms of reducing maturities, the measure would have been more effective a few months ago with lower parities, when the bonds were trading at 20 cents. The cost will be paid by the BCRA in dollars despite the low net reserves, and the Treasury , which does not have pesos either, will probably end up placing a non-transferable letter - whose effect is a worsening in the Central Bank's balance sheet," Marini said.

NS

look also

"Total delirium" and "fulbito for the tribune", the critics of the economists after the announcement of Sergio Massa on the debt in dollars

Four keys to government measures to reduce the gap and avoid a further rise in the dollar

Source: clarin

All business articles on 2023-01-18

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