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Debt Swap Gives Government Fire Power for US$3.5 Billion: Can It Contain the Free Dollar?


The market still doubts the 'positive effects' of the swap. They warn that it is monetarily expansive and that it will have no impact on the gap

Pending more technical definitions on the dollar debt swap announced last week by the Ministry of Economy, misgivings persist in the market that this may have the two specific objectives pursued by the Government: control the gap and

increase financing in pesos.

After a wave of rumors, reports, criticism from their own and others, the

instrumentation of the exchange would be known this week.

In the City they are skeptical about the impact that this measure can really have on the financial front and warn that it is a

move "too expensive" for the economy.

For Fernando Marull, from FMy Asociados, "The greatest impact and objective of the measure is that now the Government

would have up to US$3.5 billion to sell and "control" the parallel dollar

. It does so by selling them cheaper and thus lowers the implicit dollar The objective of Mass

a is to have control of the parallel dollar until the STEP

, "he said.

"Before PASO 2021, Guzmán spent US$ 3,000 million to control the dollar," recalled the economist, adding: "But there is also a fiscal objective, because the BCRA could finance it by buying those Bonds from ANSES.


Pablo Repetto, from Aurum Valores, affirmed: "The exchange implies an

increase in indebtedness with the private sector by almost 14%

. This will allow the Government to obtain an intervention power equivalent to US$ 2,800 million (12,000 million nominal for 23% of parity)".

At the same time, he warned: "The increase in private foreign currency debt

is extremely high and will surely affect the sustainability

of the debt, probably generating further downward pressure on all sovereign bonds."

Along the same lines, Delphos analysts stated: "We estimate that the FGS and other public bodies have approximately a nominal value of US$ 12.5 billion of Bonares, which at market prices is equivalent to close to US$ 3 billion. However, Private sector demand must

still be "built"

through incentives (mainly regulatory), in a similar way that happened with the debt in pesos since 2020".

The market doubts that, with regulatory incentives through, the private sector will eventually buy those holdings.

"It is not clear that the mere easing of the restriction on the operation of Bonares with ALyCs' own portfolio will generate demand. These debt securities are trading at 24/27 cents for every dollar they promise to pay and the market has a clear preference for corporate risk or, even, sub-sovereign (provinces) versus the sovereign (National Government)", they pointed out in Invecq.

In this way, in the City they agree that the measure, in addition to being expensive, will end up being

expansive from the monetary point of view


Although in the Government they insist that they are not working on a "plan to arrive" or a "plan to endure", an operator pointed out that the amount in pesos of the bonds that enter into this exchange is equivalent to the total debt maturities foreseen for the month of April.

"With a certain level of market roll over, the government is

borrowing in dollars at very high rates

to get the pesos it needs to pay next month's bills. In a more or less stable situation, the maximum time they earn with this operation is 90 days".

Although financial prices fell after the news of the exchange, market players do not believe that these effects will be long-lasting.

Above all, because the prices of dollar bonds have fallen sharply in recent days, with reds hovering around 6%, but the price of the CCL fell at a slower rate.

"We see that the market is still continuing the process of "adjustment" to the greater future offer of Bonares," they said in Delphos, while adding: "It is difficult to think of a very significant reduction in the gap without measures that reduce uncertainty ".

look too

The IMF asks to "remain vigilant" in the face of "high" financial uncertainty

"The greatest drought in the last 100 years": Sergio Massa anticipated new measures for the countryside

Source: clarin

All business articles on 2023-03-27

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