Argentina Seeks to Attract Investors with Dollar-Linked Bonds Amid IMF Visit

RIO DE JANEIRO, BRAZIL – Argentina, which is facing a domestic currency crisis, strict capital controls and a drop in its foreign reserves, is trying to attract cautious investors, with a bond issue tied to the US dollar auctioned on Tuesday.

The bond is part of a range of government and local central bank measures to restore confidence in the Argentine peso and encourage local savings. Argentina has restructured over US$100 billion in foreign currency debt in recent months.

The restructuring, which includes US$65 billion in debt issued under foreign law, has helped to pull the country out of default, but its access to global markets is very restricted. A team from the International Monetary Fund (IMF) landed in Argentina on Tuesday to begin negotiations on a new agreement.

“The government must show a change of direction quickly,” said Federico Furiase, director of Eco Go consulting company, adding that Argentina has “very little fuel in terms of reserves”.

Argentina has temporarily cut export taxes on industrial, mining and agricultural products to boost sales and international reserves.

The IMF team is expected to begin meetings in Buenos Aires as the government seeks a new program to replace a failed US$57 billion loan. “The goal is to better understand the authorities’ plans and priorities and have a deeper understanding of the socioeconomic situation,” an IMF official told Reuters. “The delegation is in a listening mode.”

The Bank of America said in a report that the new bond is aimed at encouraging savings in pesos by providing its holders with some protection against currency fluctuations, but that it was not a miracle cure.

The official Argentine peso had dropped by 0.09 percent, to 77.09 per dollar, while weakening even further in the parallel market, widening the spread over the official rate to a record 97.1 percent. The bonds traded on the over-the-counter market dropped by one percent on average.

Source: InfoMoney