The economic team that leads Sergio Massa will seek, with the new tender for next Thursday, tear down the wall of maturities that had been erected between March and June for holders of bonds in pesos and, in this way, also liquefy an inflationary effect in the face of the possibility of dollarization of investments. If the plan goes well, he can get through a winter without that self-built pump, albeit behind the financial move. a strategy is hidden to inherit from the next administration the impossibility of defaulting the local debt or to avoid what they consider to be their greatest fear: the dollarization of the Argentine system.
At least, that’s what the head of the Palacio de Hacienda and the president of the Central Bank believed, Miguel Pescewho activated the put to guarantee liquidity to banks in the event of a possible reprofiling of the debt in pesos. The market’s concern is no longer due to the actions of the current government, but rather the focus has shifted to the management that it will assume from next December. That’s why your operators asked to revive, with their own perspective, the financial tool that had already been used a year beforewhen the Minister of Economy was Martín Guzmán.
According to official sources that participated in the negotiations, the Massa-Pesce plan will “condition” the economic policy to a government that seeks to reshape the bonds of the debt in pesos or that “wants to change the rules of the game for individuals and companies that entrusted their investments in public sector bonds.” It is the first time that a fine harmony between both officials has been demonstratedafter some disagreements and the delegation of the minister’s confidence in the vice president of the BCRA Mark Cleri.
What is a put option?
He put it is a put option in the hands of the banks and it is a tool that is used by the financial system. In Argentina, its most recent use had been with Guzmán trying to prevent the dollarization of local savings. It was in July of last year, a few days before he left the Palacio de Hacienda, and he operated on national Government securities awarded as of July 2022 and with a maturity of less than December 31, 2023. His objective was to “reduce volatility of the prices of Treasury instruments”.
What happened to the dollar and Argentine shares after the exchange announcement
Pesce updated the conditions of the put option with the idea of help “banks that, due to the very nature of their business, have mismatches between the terms of public securities and the deposits that back them”. “This option helps to transform these terms by reducing liquidity risks,” said a BCRA press release.
The truth is that Massa and Pesce agreed that, to reduce the inflationary panic, they had to take a joint measure. Knowing that expectations are a driver of remarks, both leaders of the economic team decided to work together to banish fears, especially future ones. There is strong anger on the fifth floor of the Palacio de Hacienda and in the BCRA for the public warnings given by Together for Change (JxC) with the press release about the debt bomb in pesos.
Condition a default of the debt in pesos
“With the agreement with the International Monetary Fund (IMF) they left us tied hand and foot with a public debt in dollars that conditioned the economic policy of our government. If they reach the government, we will bind them to respect the country’s debt and the savings of Argentines”, he was sincere, before PROFILEa source that integrates the economic team.
The goal of put It is to guarantee the value of public securities and, according to the BCRA, the number of times that banks used the tool was counted. “The few times they exercised the right to sell, it was to check if the Central Bank was selling a story or we were actually supporting them.. And he came out barbaric, because every time we sold him putit allowed us to sterilize those pesos and take them out of circulation ”, they highlighted from the Central.
Sergio Massa activated the anti-reprofiling insurance, amid complaints of a financial destabilization plan
The truth is that, “since the opposition attack” with the statement about the payment alert for bonds in pesos, Massa and Pesce got along to resolve the financial crisis that was coming. “It was a joint effort”and responded to the request that came, even, from some analysis and investment agencies from different parts of the world, which demanded guarantees from Massa’s economic team to avoid a flight of investments in the local system.
Will there be a dollarization plan?
In the government there is certainty that JxC’s objective is “to benefit from a possible inflationary crisis, in order to default on the debt in pesos and liquefy local savings” if they arrive at the Casa Rosada since December. “That would be the first step in a plan to dollarize the economy, but with these measures we are going to condition that strategy, since there will be no flight of investments, nor will there be a sudden devaluation that gives a platform to these incendiary threats”, said, words more, words less, one of the members of the team as an argument to guarantee the success of the program.
Roberto Feletti: “We must preserve the debt market in pesos”
The Massa-Pesce relationship was born wrong. The minister tried to kick him out of the Presidential Office to put a man he trusted there. He met with the refusal of the president Alberto Fernandezbut he managed to realign some soldiers in the BCRA and put Cleri as the custodian of the oiled operation in line with the goals of the fifth floor of the Palacio de Hacienda.
Although they shared visits to the IMF or the announcement of measures related to the accumulation of reserves, Massa maintained his distrust of Pesce and even confronted him when the BCRA wanted to put the traps on the field producers who had entered the dollar-soybean plan. . In his trusted circles he came to say that he was “useless”. Today that reality seems to have changed: “this agreement with the banks was the product of teamwork,” they highlighted from the offices of both officials. Thursday’s tender will be the litmus test to show if that trust is durable or will be at risk again.
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