:quality(85)//cloudfront-us-east-1.images.arcpublishing.com/infobae/V7YXMNYUA5B7LI5XLVVX37OHCA.jpeg "Banks responded to opposition after criticizing talks for multimillion-dollar peso debt swap")
The Association of Argentine Banks (ADEBA) came to discuss the criticisms of the economists of Together for Change (JxC) on the proposal to exchange debt in pesos that the Minister of Economy is negotiating with the financial sector, Sergio Massa. The person in charge receives today bankers to agree on the operation and to release maturities for 12 billion dollars, a financial engineering which was attacked hard by the opposition coalition through a press release.
The President of ADEBA, Javier Bolzicodefended the initiative after what were the accusations that “the aforementioned swap will give banks an option that no investor has: a ‘double bond’ adjusted for inflation or devaluation and the ability to sell all securities to the Central Bank at any time,” criticisms that were extended by former Finance Minister Hernán Lacunza, former Central Bank President Guido Sandleris and MP Luciano Laspina.
Lacunza posted on his Twitter account that “the government is preparing a debt swap with the banks” and that he interprets it as “a vile and ruinous operation for the state”.
Given this, Bolzico remarked that “the proposed debt swap is about the securities (not the holder)”. Furthermore, he pointed out that “banks have a lower percentage of total debt. So to say it’s ‘with the banks’ is – to say the least – misleading”.
One of the most criticized points was the pro-government promise that the Central Bank would provide liquidity to securities issued on the stock exchange, allowing unlimited sales to investors in case they wanted to get rid of these papers in the future. The promise was called a “put” by the opposition and considered an excessive advantage. Bolzico disputed this argument.
“A put is an option to sell an asset at a predetermined fixed price,” said the president of ADEBA.
“A put is an option to sell an asset at a predetermined fixed price. Until today, the Central Bank has never bought bonds at prices other than market prices. It is a conceptual error to call the liquidity option of selling bonds to the Central Bank put” (Bolzico)
“Until now, the central bank never bought bonds at non-market prices. It is a conceptual error to call the liquidity option of selling bonds to the Central Bank a put,” he added.
Another of the opposition’s arguments is that the government offers currency insurance to those entering the stock market, a point Bolzico also debated.
“Foreign exchange insurance has nothing to do with the currency in which a security is paid for. Double securities can be considered, in certain scenarios, as a debt in dollars. Most of Argentina’s debt is denominated in dollars,” he concluded.
Reactions to JxC’s statement also included officials.
“The defaulter believes that everyone is in the same condition. They drove the country to default in 2001. They drove the country to default (in pesos and dollars) in 2019. Tell people the truth: they’re going to default again because #YaLoDicieron,” the secretary said. to Industry and Productive Development, Jose Ignacio De Mendiguren.
“Say it without shame! They want Argentina to explode not just because of election speculation against the government. They also do business. They want peso debts to go unpaid, the currency to be devalued and inflation to spiral out of control, at the same time as wages lose value,” he added. Sebastien GalmariniDirector of Banco Provincia de Buenos Aires.
The government is preparing a peso debt swap that could include a basket of eligible securities worth some $7.5 trillion. Over the next four months, maturities are over $12.3 trillion.
A series of meetings will take place on Monday between officials from the Ministry of the Economy with banks, insurers and mutual funds (FCI).
The objective will be to reach agreements in which these sectors undertake to enter into the operation, a way of clearing the horizon given the large number of deadlines that are looming until the end of the ‘year.
The idea is that the swap defers a considerable part of the payments to the first years of the next mandate, so that this would occur after the 2023 elections. In principle, the idea proposed for the maturities would be between 2024 and 2025.
The government argues it would also reduce pressure on parallel dollars ahead of each Treasury tender.
As noted, debt holders will be offered CER-linked bonds and a dual index that can pay for the investor’s most convenient adjustment between the rate of price growth and the movement of the official dollar.
The proposal is that 80% of new bonds move with inflation and 20 are dual in nature.
Continue reading: