On September 10, JP Morgan Bank rebalanced the Argentine country risk based on the prices of the new bonds, the index fell almost 50% and placed at 1,101 units. The new restrictions announced by the Central Bank (BCRA) and the National Securities Commission (CNV) affected the quotations of the sovereign instruments issued for the exchange and brought the surcharge that Argentina must pay to get into debt to 1,258 points, an increase of 14.26% in only eight days.
According to a report by the US consulting firm Moody’s, the COVID crisis and the fragile economic situation will increase the problems for corporate credit in most sectors in Argentina, at least until mid-2021. The document points out that the restructuring of the foreign debt could give some relief to the situation, but it clarifies: The tense fiscal accounts of the Government limit its capacity to support the business sector. The financial trap puts at risk the possible debt renegotiations of the provinces, which in many cases are already close to materializing. The companies that have been affected are Banco Hipotecario, which faces capital maturities of around $280 million on 11/30 this year, and IRSA, with $181 million by 11/15.
The energy company PowerChina made progress in its talks with the state railroad entity ADIF to build a $1 billion-plus railroad that would move oil and gas from Vaca Muerta to the port city of Bahia Blanca. Source: Ámbito
The Government informed that between October 15 and March 31 there are maturities of corporate debt for $3.3 billion. For companies with obligations over $1 million, they will only be able to buy on the dollar exchange market for 40% of the capital that matures. The rest has to refinance with new foreign debt with an average life of 2 years. The restriction points directly to the heart of companies leveraged in the capital market with negotiable obligations (ON) in dollars. It increases the risk of investing in Argentina.
The wholesale price index registered in August the most significant jump of the year, increasing by 4.1%. The variation is a consequence of the 4.1% rise in National Products and 3.9% in Imported Products, as reported by the INDEC. In year-on-year terms, the increase was 35.4%.
Argentina on Wednesday unveiled a new 35 percent tax on foreign currency purchases to prevent the public from hoarding U.S. dollars in the face of a weak peso. The Government said it would tighten currency controls to dampen the demand for U.S. dollars. Previous restrictions remain in place, including limiting citizens to buying no more than 200 U.S. dollars a month. The new tax does not apply to spending on healthcare, medication, books in any format, online education and software for educational purposes.
The Government launched the Local Supplier Development Program, with a budget of 2.5 billion pesos ($33.25 mn) and targeting strategic value chains for the national economy. In this context, global brands of agricultural machinery are added to an official plan of local suppliers to develop national parts of world quality, at competitive costs and scales of production.
The Government revealed that the deficit of the GDP projected for 2021 would be 4.5%. It will cover 40% of the deficiency by placing debt in pesos in the local market, and the remaining 60% by the transfer of profits from the Central Bank to the Treasury.
Private sector companies will be able to access only 40% of their dollar requirements for the financial debt
The Government issued a battery of measures with which it intends to reduce the demand for foreign currency, in which private sector companies will be able to access only 40% of their dollar requirements to pay financial debts in foreign currency and will have to present a detailed refinancing plan to initiate a process of renegotiation of their respective external liabilities. It occurs in a context in which reserves registered a notable fall to $388 million in September. So far this year, a retraction of $2.33 billion has been accumulated, while net reserves oscillate around $7 billion.
The Government reported that as of August 31, the public sector debt as a whole, in pesos and foreign currency, amounted to the equivalent of $329.4 billion, $2.05 billion more than the previous month, as a result of placements and assistance from the Central Bank for $4.74 billion and payment of debt maturities for $2.69 billion. Total debt accumulated $16.12 billion in 9 months.