By Marcelo Di Bari on February 13, 2023
No to the IMF
There is a mountain of debt that at the end of December was valued at $ 23.2 trillion, of which more than 60% will mature during the current year has unleashed the strongest economic clash between the government and the opposition in recent times. The trigger was the communiqué issued by the Argenitine national board of Juntos por el Cambio, (JXC) that pointed out the “abusive use of instruments in pesos adjusted in dollars with rates impossible to pay”. The group denounced that the accumulated public debt will be a “time bomb” for those who are elected in the next elections.
The text gave way to statements from one side or the other in which there were pass-backs on the process of public indebtedness of the last years and petty speculations about the convenience or not of the explosion of that bomb. The crisis began during the Macri administration as he was leaving office he took out a 45 billion dollar loan from the International Monetary Fund (IMF), and wiped his hands of any responsibility of how the country would pay back the impossible loan.
Even figures who in recent times had called for silence, such as the self-exiled Martín Guzmán, came out to reproach JxC’s position. “Generating instability to win an election hurts us as a society. Let’s live up to the country we can be,” said the reappeared former Minister of Economy.
The background to the discussion is the large number of bonds and bills, some at fixed rates and others with dollar and/or inflation-adjustable principal, issued in recent times. Their proportion of the total debt grew from 23% to 33% in the last five years, after the international markets stopped lending dollars to the country. The accumulation of debt in pesos is the logical consequence of the chosen path: it was the IMF that pressured the government to finance its deficit exclusively through domestic credit, avoiding monetary issuance and other Central Bank aid.
The time for the swap
Aware of the enormous pressure on the fiscal accounts, at the beginning of January the portfolio headed by Sergio Massa called for a voluntary exchange of securities to decompress the maturities that had been concentrated in the first quarter. In this way, it managed to postpone almost $ 3 trillion, although most of this amount will mature before the elections, a time of high political tension and in which uncertainty could play against the refinancing required by the government.
After that swap, according to the study prepared by the Congressional Budget Office, one of the agencies that closely monitors the evolution of the debt, the maturities in pesos for 2023 total about $ 14.3 trillion (at last year’s year-end exchange rate, slightly more than 80 billion dollars).
The possibility of refinancing these obligations will not be left exclusively in the hands of the market. According to an analysis by the consulting firm Eco Go, only 40% of the total debt is in the hands of private investors. The rest corresponds to other government agencies, mainly the Anses (whose Sustainability Guarantee Fund holds government bonds for $ 6 trillion) and the Central Bank ($ 3.5 trillion), which will dispose of these credits in a government-friendly manner.
The situation, however, could explode in the air if a new government decides to unilaterally reaffirm the securities (i.e. default) as it was done in the last years of Mauricio Macri’s government by the then Minister Hernán Lacunza. That would collapse the bond market, as it happened in the middle of last year when a consulting firm warned about a possible default on those securities.
That is why, in defense of the government’s position, the Deputy Minister of Economy, Gabriel Rubinstein, made a general demand to the JxC’s leading referents: “And if the problem is the maturities of 2023, why don’t you change your discourse? How about saying that you are not planning to reschedule at all? If you win, it will be good for you. And in any case it will be good for the country”.