Exchange restrictions on the provinces began to suffer fissures. The Federal Justice ordered that the provincial government can buy dollars from the Central Bank to meet its debt commitments. It was after the province filed an injunction last week in rejection of a rule of the monetary authority that limited access to the single exchange market.
In a statement, the government of Juan Schiaretti reported that "the Federal Judge of 2nd Nomination of the city of Córdoba, Alejandro Sánchez Freites, granted the precautionary measure requested by the Province in the amparo action initiated against the Central Bank of the Argentine Republic (BCRA) for the resolution that prevented access to the Single Exchange Market to acquire the dollars necessary to face its debt in foreign currency. "
"The judge ordered the inapplicability of this measure, so the BCRA must provide without any restriction the sale of the dollars necessary to cover the quota that expires on June 10 of this year," he added.
In the analysis, Moody's Investors Service notes that these restrictions, details of which are not yet published, severely reduce investors' appetite for Argentine provincial debt.
"If extended, the measure will considerably limit the financing options of local and regional governments and force provinces with weak foreign currency positions and significant debt obligations to resort to debt restructuring processes by 2024," he said.
According to the rating agency, "Communication "A" 7782 of the Central Bank reflects the materialization of currency conversion risks already existing in the current context."
"Although it does not have an immediate impact on the financial metrics of Argentina's sub-sovereign issuers, in the medium term this type of measure could negatively affect the credit profile of some local governments due to the incremental costs that would be imposed by eventual refinancing and/or obtaining foreign currency to honor the commitments assumed," Held.
In development
See also