The Ministry of Economy of the Nation carried out a new exchange of debt bonds in pesos. Sergio Massa’s team described the result as satisfactory due to the adhesion of 67 percent of the holders. Thus, of the almost 4 trillion pesos that expired in the first quarter, only 1.4 trillion will have to be paid. But the international agency Standard & Poor’s (S&P) evaluated the operation negatively, considering that it meant a “default selective”.
Why such a difference between both visions? Because the authorities breathe a sigh of relief when they kick a problem forward and analysts stress that the underlying issue is not resolved.
Our country must face local debt maturities this year for some 12 trillion pesos. Can you pay it? No. Then, it is necessary to redeem the expiring bond for a new one. But mistrust of the market works against that objective. The macroeconomic imbalances, the weakness of the Government, the internal ones of the ruling party and the opposition, and elections that are too close without either of the two main coalitions having a natural and undisputed candidate plus a clear economic program, are the main reasons why which those who have debt titles in pesos only accept to exchange them for a short term and a high yield.
Not many holders have accepted the exchange. Approximately half of these titles are held by the public sector. Therefore, last week barely a third of private holders participated. The official reading was positive because that proportion exceeded that of the previous exchange.
But the analysts see that the key for those few private individuals to accept the refinancing is a dual bond that ensures an adjustment for inflation or for the variation of the official dollar, the option that represents the most benefits for them on the collection date. And on top of that, they are very short-term bonds: they expire between April and June.
Time is an obstacle in itself: moving the debt that matured in the first three months of the year to the second quarter is not very meritorious. Every month close to a trillion pesos matures, average. The exchange lowers the number of the first months at the cost of raising it in the following ones. As the election approaches, will the payout probability go down or up?
The amount is the other obstacle: the dual bonds issued already exceed, measured in dollars, 30,000 million. A devaluation would aggravate the situation. But the exchange rate delay makes it impossible for dollars to enter, and that shortage slows down the economy.
Now, to pay the bonds you have to issue them. And issuance accelerates inflation. So, you have to pay as little as possible: that represents, for S&P, a default selective that, in the medium term, could deepen.
There seems to be no way out. The only possible alternative is a strong political signal that impacts the markets. We have already warned: the government and the opposition must agree as soon as possible on a global macroeconomic stabilization plan.