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Bond swap: buy high and sell low, a more than controversial business


Due to the drought, US$ 20,000 million will stop coming in and Sergio Massa has no way to compensate them. Furthermore, he does not get private financing in pesos.


Cristina Kirchner

's support for the bond swap launched by Minister Sergio Massa, it will be difficult for

Fernanda Raverta

to sign that operation.

The head of the ANSeS must authorize the sale of bonds in dollars at

US$23, which are the same as those that in January the Minister of Economy ordered to buy by paying US$32.

Buying high and selling low

is the basis for bankruptcy, but it also becomes relevant when it comes to

managing assets that support operations involving retirees.

The recitals of decree 164/2023 already mark the difficult situation that the economy is going through, emphasizing the need to obtain funds to fill a growing fiscal hole and "reduce the negative incentives generated by the exchange rate gap on inflation



Sergio Massa

's move

to obtain financing has as a basis risk the fact that until now the State has bonds in dollars and now it proposes to

sell them cheaply to the private sector

to keep bonds in pesos.

This operation is taking place in an Argentina

with more than 100% annual inflation

and when the Government will have serious difficulties in complying with the fiscal deficit reduction agreed with the IMF for this year.

It is probable that offering dollarized bonds (an old tactic of governments in an election year to devalue a little and provide exchange rate coverage) will calm free dollars (MEP and counted with liquidation) after having temporarily crossed the $400 barrier, but the last word is far from being said.

The lack of dollars and the perspective of those that may be lacking is in sight this month in which

the Central Bank has sold US$1,459 million 

and net reserves are around US$1,500 million.

The Government and the markets are verifying daily that the drought would generate a drop in income of US$ 20,000 million and

the Economy has no way of compensating for this result.

Until now it had been trying to cover that deficit

by stepping on imports

, but the increasingly negative forecasts for economic activity turned on red lights.

Less than 90 days ago, private forecasts for economic activity in 2023 ranged from 0% to a 1% contraction in gross product.

The reset of the last few weeks (due to the drought cocktail and overloaded stocks on imports) points to

falls of between 3 and 5%


Falling economic activity, inflation exceeding 100% and wages running behind the rise in prices make up a very complicated framework for the Government in the election year, with some new political ingredients.

As usual in election years, Kirchnerism tries to keep

the exchange rate behind

in an attempt to make wages grow above the dollar and inflation.

In 2023, this model is difficult to apply.

The ongoing debt swap shows that the government was left without the possibility of obtaining private financing in pesos and that is why it

must resort to forcing public organizations to sell their bonds

in a striking operation.

He tells agencies to sell him the dollar bonds from their portfolios.

30% of the pesos they obtain will be freely available and

70% must be used to buy dual bonds, the best between inflation or devaluation


Thus, the Government would have some US$2,500 million left to sell for bonds which, assuming a dollar of $400, could imply

a sterilization of the order of one trillion pesos.

Obtaining this financing of one trillion pesos faces maturities of public debt in pesos that, in the second quarter, reached $

 3 trillion


And that hits

 $10 billion between now and September


The financial challenge is more than important.

Meanwhile, the Government recognizes that the exchange rate gap of 90/100% is unsustainable, 

permanently lets it be known that it is studying measures

and that at any moment the minister can take another rabbit out of the hat, which, as is evident after the soybean dollars 1 and 2, are less effective.

Massa's new attempt to avoid a currency jump is taking its first steps on a winding road in which passers-by are beginning to demand coverage at an accelerated rate.

look too

Emmanuel Álvarez Agis: "Massa's plan could end with a rise in the financial dollar"

The Government began to make the stocks more flexible to operate with financial dollars and is preparing more measures

A bold move by Sergio Massa: use the Retirees' Fund to finance the fiscal deficit

Source: clarin

All business articles on 2023-03-25

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