Provinces restricted from accessing official exchange market for debt payments in hard currency

2023-06-02 20:30:05

The governors of Neuquén and Mendoza, Omar Gutiérrez and Rodolfo Suárez, respectively, spoke today against the decision made by the Central Bank to restrict the provinces from accessing the official exchange market in order to obtain the necessary dollars to cover all the committed debt payments in hard currency.

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The BCRA rule establishes that the provinces will be able to access for only 40% of the amounts to mature while the remaining 60% of the capital maturities must be refinanced or, given the immediate validity of the measure, faced with dollars of the the jurisdictions.

Córdoba is the first on the list to feel the impact of this new regulation since next week -June 10- it must face a capital maturity of USD 120 million. The province already anticipated the presentation of the amparo request to be able to make the payment normally. The same path, transcended in the last hours, will follow other affected provinces.

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Entre Ríos is also preparing to join the list. As Infobae was able to learn from sources in that province, as soon as the norm was known in the Entre Ríos government, a series of consultations began between different official instances to evaluate the initiation of legal actions aimed at preventing the BCRA decision from being applied.

For Suárez from Mendoza, the measure “also implies not allocating it (those funds) to public works or services that the province needs, for this reason we are going to go to the federal Justice to request that said provision be annulled, in defense of the interests of the Mendoza and Mendoza.

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For his part, the Neuquén governor also complained about the measure ordered by the Central, which he described as “unexpected and without consultation” and about which, he warned, it will generate a doubling of liabilities in the provincial accounts, mostly tied up to foreign currency. Likewise, he considered that “it is impossible” to meet the goal of the national government to present a debt restructuring plan by July 18.

In a press conference within the framework of a tour of the work of the Norpatagonian hospital, the president anticipated that the Minister of Economy, Guillermo Pons, is talking with his peers from the other provinces to define a strategy against the measure. On his side, the Cordovan Finance Minister, Osvaldo Giordano, ratified preliminary contacts with peers from the other affected provinces, although, he warned, the urgency of the case in his province warrants a more immediate reaction.

“What this produces is that, for 60% of the dollarized debts of the provinces, that value doubles,” said the president, alluding to the need to resort to the financial market to obtain the necessary currencies, in which the bill trades with a 100% gap with respect to the official exchange rate.

“It is a lack of respect for the provincial autonomies and economies. Our hydrocarbon production continues to be settled at the official exchange rate. Our income is tied to the official exchange rate, both in the internal sale prices of oil and gas as well as in the external sale for exports”, insisted Gutiérrez.

There are 14 provinces in debt in dollars, of which 8 will have to face capital maturities in the coming months, including Jujuy, Entre Ríos, Chubut, Salta and Tierra del Fuego, as well as Córdoba, Neuquén and Mendoza. Of that group, some, such as the case of Jujuy or Entre Ríos, do not have enough dollars of their own in their accounts to cover the BCRA’s requirement, which will force them to resort to the financial dollar market.

“The BCRA resolution that prevents the provinces from buying dollars at the official price to pay their debts, thus doubling the cost of the same or forcing them to refinance, violates their autonomy, is discriminatory and anti-federal, complicating the process of payment”, the governor of Mendoza posted on Twitter.

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