Instead of discussing a successful trade, why don't we discuss the future?
Under this title, Gabriel Rubinstein, Vice Minister of the Economy issued a statement to defend the recent debt swap for 4.3 trillion pesos and criticized the economists from Together for Change who had opposed the operation last week.
Specifically, Rubinstein undertook against the former minister Hernán Lacunza, the former president of the Central Bank Guido Sandleris and the deputy Luciano Laspina.
In the text, he refuted the statements of these economists prior to the swap and then invited them to discuss the 2024 Budget to direct
the fiscal accounts towards balance, instead of the deficit of 0.9% of GDP forecast.
Rubinstein's text
On Thursday, March 9, a successful debt exchange in pesos was completed, which allowed us to extend maturities in the coming months for some $4.3 trillion, and which will then mature in 2024 and 2025. In this way, we began to "dissolve the towers" of
maturities pre-election events that were generating so much concern.
Investors, businessmen, governments of other countries, large savers, let's say, "the market" in general, received this achievement very well.
I assumed, quite naively, that my colleagues from Together for Change, whom I have known for years,
would also recognize the success
of this measure and begin to change their discourse, placing themselves in a more collaborative position.
Not to "help" the current government, but to take things off the table that only hurt the country and all political forces.
If they win,
do they want savers and investors to be afraid of holding government bonds?
And that depositors are afraid that banks have government bonds?
Since it sounds pretty insane to me, I figured we could start to "raise the bar" of public discussion.
And that we would start to dialogue and discuss more important things, such as: what can we do to eliminate the fiscal deficit, so that the State does not have to increase its indebtedness?
But not.
Through a statement and via tweets from Hernán Lacunza, Guido Sandleris and Luciano Laspina, Together for Change he once again showed his most untimely face.
Let's review and comment a little on what they have said: 1) "A vile and ruinous operation."
An exchange with a longer term, at reasonable rates, voluntary, ruinous for whom?
Certainly not for the State (or is it less ruinous to default?).
Vile?
What does it mean done with evil, a despicable action.
Is this the adjective for a voluntary debt swap?
Guys…
2
)
"It would violate Article 19 of the BCRA Charter":
why do you think this, if the BCRA does not guarantee the bonds?
3)
“It would violate the Financial Administration Law”
Why do they say that, if the State manages to extend terms and at lower rates than those in force in the market?
(Would you like lower rates? How about you stop saying debt less than 10% of GDP is unsustainable and help keep long rates ever lower?)
4)
"The debt would become due daily"
, for the misnamed “put”.
It is rare that they do not understand that, with or without explicit insurance, when a bank invests in medium-term assets (for example, 2 or 3 years) and its liabilities are 30 days (or less), it requires some liquidity window that can provide the BCRA (illiquidity rediscounts or, in this case, the so-called "put").
The banks already have a put on the public debt (that is, the swap does not "aggravate" the situation), and they simply do not use it because they have to pay for that put, and when using it they must sell the bonds to the BCRA at a lower than market value.
Only in case of a "run" would it be convenient for them to use it massively.
What case could this be?
For example, that Together for Change won the elections in 2023 and an influential government economist told the President: “Mr.
President,
I have come to the conclusion that there are many pesos left over”.
To which the President would ask: "And what do you suggest?"
To which the economist would reply: "Reprofile the debt."
And the President would say, “Okay.
Let's proceed."
Panic in the market.
Bondholders scrambling to sell.
And there, the BCRA buying the debt, surely in the middle of a run on deposits.
A much more probable run is seen that the BCRA does not act, with banks with many bonds about to be defaulted.
Depositors would have plenty of reasons to run away.
All because of the foolishness of the government.
the BCRA buying the debt, surely in the middle of a run on deposits.
A much more probable run is seen that the BCRA does not act, with banks with many bonds about to be defaulted.
Depositors would have plenty of reasons to run away.
All because of the foolishness of the government.
the BCRA buying the debt, surely in the middle of a run on deposits.
A much more probable run is seen that the BCRA does not act, with banks with many bonds about to be defaulted.
Depositors would have plenty of reasons to run away.
All because of the foolishness of the government.
5)
"If the option is exercised, it could trigger a new jump in inflation that no responsible central banker could admit
."
Following the above reasoning, the responsible thing for them would be: “Since the BCRA should not buy bonds, they should remain in the banks so we can reshape them.
And if the depositors are scared, and well… we will have to prohibit them from withdrawing deposits (corralito, corralón, bonex plan, etc)”.
Because the "sacred" thing is that the BCRA does not issue to stop the bullfight (caused by the Government itself).
In other words, responsible conduct would be to go from default (bondholders) to default (depositors).
And irresponsible behavior, the one that we are developing, seeking to avoid all this.
Look at you guys!!!
6)
"They give banks an option that no investor has”
(put). As if to say, banks have access to rediscounts for illiquidity, repos against bonds, etc. that individual investors do not have. Precisely, because they are banks , and safeguarding the security of depositors is a basic function of the BCRA.
7)
"The debt that was due every 3 months will now be due daily
. "
As explained, it is false, since the "put" exists now and that has not changed.
8)
"This action (exchange) could generate serious problems for present and future management
."
He would tell them: don't worry so much about the present management.
For us it is a very good measure.
And as for the future: if you see it as too demanding a challenge to manage a debt of less than 10% of GDP, with maturities now more spread out over time, don't you think you should review whether you feel in a position to exercise government?
Look, it's full of more difficult problems than this.
Oh well.
It is what it is.
And the political forces must continue looking for a way to understand each other and solve the problems of the Argentine people.
By the way, the months go by and
a Budget for 2024 will have to be agreed.
And lo and behold,
this Ministry is inclined to reach a primary fiscal balance as soon as possible
(and then a primary fiscal surplus).
And "a little bird" told us that Together for Change, apparently, also agrees with such an objective.
How about, then, if we leave all this "nonsense" aside and start technical-political discussions now,
to see if in 2024, instead of the 0.9% deficit (agreed with the IMF), already with an economy more powerful (without drought, completed NK1 gas pipeline, new government, etc.)
, do we dare to seek a balanced budget?
What expenses would we lower?
What tax breaks could we leave out?
Does anyone propose to raise taxes?
Much to discuss.
And who knows, maybe we could agree.
And we would begin to leave this issue out of the political discussion as well:
the need to balance public accounts.
And look at you: in one of those, almost without thinking about it, we would be achieving: a)
Stop proposing default as an economic policy tool
b) Stop discussing the need for fiscal balance and focus the discussion on "how to achieve it" ( how much to lower expenses, how much to raise taxes).
It would not be little progress.
You can call the Secretariat for Economic Policy and,
if you want, starting tomorrow we can start talking.
AQ
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