Massa will announce an international loan from banks to strengthen reserves: the rate will be below 10%

Sergio Massa he does not want the bad inflation data for January, which will be published on Tuesday, to take precedence over the agenda for the week which is beginning. For this reason, a battery of relevant announcements arrives, to maintain the initiative on various topics. Among them, the closure of the “repo” stands out, loans in dollars from international banks against bond collateral, which aims to consolidate the level of reserves to meet the electoral calendar.

Although the economic team keeps these negotiations a secret, GlobeLiveMedia was able to discover that the amount will exceed $1,000 million, the rate will be in single digits (Libor plus 4.5% or 5%) and the term will exceed two years. . The dollars will go directly to the Treasury and not to the Central Bank, an express request of the minister. This would be the first international loan from private investors since the current government took office in December 2019.

One possibility is that at least some of these currencies will be used to continue buying debt. But it is not clear if there will be too much margin, since the reserve accumulation commitment made to the IMF is very important. The first quarter target is still more than $2 billion short. However, the foreign loans that the government expects to receive in the coming weeks (including new disbursements from international organizations), reduce the purchases that the Centrale should make until the end of March to around 750 million dollars.

The Central Bank continues with a selling balance in February and generates more uncertainties regarding the horizon of the exchange rate. But the new disbursements from the organisations, the announcement of the “repo” from the private banks and the savings made on the purchase of gas seek to generate some relief on that side.

In June, it becomes even more complex to comply with the IMF. The agency requires a jump in net reserves from $7.8 billion to $10.8 billion. “If there is a breach, it will not be known until after PASO, so maybe the issue is not too much of a concern for this government,” an influential economist explained in a meeting with clients. .

On Friday at the last minute, the Economy announced significant savings on the purchase of LNG (Liquefied Natural Gas) to face the winter, taking advantage of the drop in international prices. Of the $3,465 million expected, $1,313 million ends up being spent. “This implies a saving of 2,100 million dollars in the use of reserves and at the same time a budgetary saving of 500,000 million pesos,” they explained. With the construction of the new pipeline, the savings would be much greater during the winter months compared to what was spent last year.

With these savings in dollars, the government plans to release some more imports, which would have already started to happen in the first week of February. The objective is to reverse the drop in activity suffered by both industry and construction in the last months of 2022. This is another of the challenges that Massa faces in its management: in addition to the drop in inflation and the consolidation of reserves, it is essential that the level of activity does not fall.

The measures underway to relaunch production consist, on the one hand, in partially making imports more flexible, insofar as the balance of the foreign exchange sector allows it. And on the other hand, aggressively exiting subsidized loans for investing companies, which started a few weeks ago and will accelerate through April.

Bad inflation data for January has already been discounted, which could even exceed 6%, while February is also firm due to higher utilities and meat. Despite this, most unions are moving forward with closing the annual parity of no more than 60%, but with a review clause

Inflation is in this context a separate chapter and perhaps the most decisive for the future of the government and more particularly for Sergio Massa and his possible presidential candidacy. January, as we already know, will show a strong jump from December’s 5.1%. It is not excluded that it could even exceed 6%, according to data from the city of Buenos Aires, which showed 7.3%.

The efforts of the Economy are already focused on what can happen this month and the following ones. February, in fact, isn’t looking much better than January. Most utility prices are going up, especially electricity and gas. Added to this is the sharp rise in meat, which will have its full effect this month.

To mitigate the latter, Massa will move forward at the beginning of the week with a series of measures for the sector, among others incentives to increase the supply of the sector, including part of the balance of exports which could be transferred to the local market. To this will be added a 10% discount for those who buy with a debit card in butcher shops participating in the program.

The fight against inflation, however, is month to month and so far the results have been meager. Issuance engines are all still on (including the payment of peso debt issued by the BCRA, via Leliq and passes), while the demand for pesos may even decrease in the coming months due to proximity presidential elections. It is hard to imagine that this year’s inflation will end up decidedly below 95%, which was the level of 2022.

The “repo” that Massa will announce this week consists of more than 1,000 million dollars provided by private banks for a period of two and a half years and a rate of less than 10%. In practice, this is the first private investor loan to Argentina since Alberto Fernandez took over in December 2019

Massa, however, insists with 60% and is pleased that the majority of parities are moving towards this definition. Of course, in any case, the door remained open for further expansions. The state-owned UPCN had already signed for that percentage and on Friday a key union like UTA (colectivos) followed suit, accepting 30% for the first half. They would soon be added as banking, textiles and UOCRA. Everything will be set at 60%, but revisable if inflation exceeds this level at some point in the year, which at this point is almost entirely reduced.

Paradoxically, the issue that raised the most dust this week is the one that worries Massa and the short-term markets the least: the future of peso-denominated debt, which continues to grow at a healthy pace. However, for the time being, the Treasury processes maturities in local currency without any problem, even if it is true that the deadlines are considerably shortened.

In the opposition, there was talk of a new “time bomb” that Kirchnerism would leave to the future administration. However, the statement from Together for Change did not offer any alternatives or what the plans would be to meet those million dollar deadlines. Even if it is possible or not to open the stock exchanges under these conditions. For now, talking about “the legacy received” is more a political affair than a look to the future.

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