Argentina forces public companies to exchange dollar-denominated bonds for peso-denominated securities
The Argentine Ministry of Economy urged national public entities to dispose of their dollar securities under foreign law for bonds in local currency to strengthen the Central Bank’s reserves, for a value of about US$4 billion.
“Today we began to give depth to the local law dollar bond market, starting with the purchase of global bond holdings of public entities, which will allow lowering the [global] foreign law public debt by some US$4 billion initially”, explained the Deputy Minister of Economy, Gabriel Rubinstein.
The 113 public entities of the State will have to get rid of their bonds in dollars to obtain public securities in pesos under local legislation, which are adjusted by the official dollar or inflation.
“The bidding is for National Treasury bills and bonds, with maturities in April, June, July, and September 2023, and February and April 2024, which will be adjusted by discount, dual or tied to the dollar”, Rubinstein detailed.
The Minister of Economy, Sergio Massa, met on the morning of March 22 with executives of banks, mutual funds, and insurance companies to announce these measures.
The Deputy Minister said that the exchange stipulated for public sector creditors would allow the State to delist global bonds and reduce foreign debt without using Central Bank reserves.
“On the other hand, restrictions that investors have today to buy AL Bonds will be released, and this new demand will be supplied by the Ministry of Economy and the Central Bank in coordination with the market players”, added Rubinstein.
With this initiative, the Treasury Palace expects to place securities in Argentine pesos with maturities in 2026 and 2027 to extend the maturity curve of the foreign debt.
“In a sustained manner, the State will be gaining the capacity to act in the financial dollar markets (…) for the deployment of measures that strengthen the macroeconomic order”, added the official.
The president of the Stock Exchange, Adelmo Gabi, said that the exchange initiative would be positive because “there will be more supply than demand”.
Following the announcements, dollar bonds fell by up to 4.7%.
At the same time, some of the different quotes for the dollar also fell, specifically, the dollar Contado con Liquidación (CCL) and the Mercado Electrónico de Pagos or stock exchange (MEP).
The Government expects inflation to fall, which accelerated to 6.6% in February and brought the year-on-year inflation rate to 102.5% for the first time in 30 years.
The country risk, which shows at what rate a country can be financed in the international market, stood at 2426 basis points, its highest level in the year.
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