Cornered by the magnitude of the economic crisis, the Macri administration settled on a course of action they tried to avoid by all means: On Wednesday Finance Minister Lacunza confirmed that the government will seek to delay the payments of the national debt, both internally and externally.
The government named this decision "reprofiling " and present it as a voluntary exchange that does not imply the reduction of capital or loss of interest rates. The minister announced he will seek to modify the agreements applying a new law that the administration will send to Congress. The foreign debt, he said, will be renegotiated with the creditors.
This decision finally begins a process that the Peronist candidate Alberto FernĂˇndez asked for and that h will have to continue if he wins the general election.
The process attempts to decompress the U.S. dollar payments that the Government has to make, to gain a little room for maneuver in facing the monetary run in the national market. On Wednesday the Central Bank was forced to sell almost 400 million dollars to control the currency. "If there was any struggle in the use (of the Reserves), it now relaxes," Lacunza said at the press conference.
The proposal differentiates between short-term debt, that is, the Treasury Bonds (Letes, Lelink, Lecap and Lecer) acquired before July 31 from the rest of the bonds issued under New York Law or local legislation. Persons who own bonds will collect payments as planned. While institutional investors - 10% of the creditors of these securities - will charge 15% at maturity, 25% at 3 months and 65% at 6 months.
In this way, of the 11.8 billion dollars of Letes that expire before December 10, about 30% may be postponed to the next term and will give Sandleris more firepower so that the dollar prices do not explode before December.
Guido Sandleris, president of the Central Bank (BCRA), who joined Lacunza in the conference, said that "the decisions adopted prioritize the use of international reserves to preserve monetary and financial stability, even if this means postponing payment to large investors of public debt. The Central Bank's commitment is with Argentines. We will continue to do everything in our power to contain nominal volatility and sustainably guarantee the stability of the financial system."
Regarding bonds, the situation is more uncertain. First, debt interest and repayments will continue to be paid according to the prospect of each emission. And then Congress will pass a law for a "voluntary reprofiling". The President's party proposes that it be done "without removing capital or interest", that is, by stretching the terms of the payments.
Regarding the debt issued under foreign law, it must be negotiated with private creditors. The proposal is similar to the one made for domestic bonds, but in this case, banks and institutional investors will be required to raise their proposals to reach a consensus with the Government. Likely, this process will not end during the current presidential term, so creditors do not know who they will be dealing with shortly.
Some bonds will not be contemplated on the voluntary restructuring plan: the Gas Plan, Bonte 2020, Boat 2021, Boat 2023, Boat 2026, Discount Law AR, Discount ARS, Discount USD, Discount EUR, Discount JPY, PR13, and PR15.
Finally, the administration will also ask the IMF to, in line with what was suggested by economists from the opposition, also revisit the payment plan to dissipate the risks of default between 2020 and 2023.
The decision was announced after Macri led a series of meetings in the presidential residence, which focused on defining the new proposals and analyzing the political and economic scenarios the Government is facing. There was even a meeting with senators of the President's party. Macri made a quick visit and left before the food was served.
In the meeting, legislators from the Radical wing were interested in a display of initiative from the Casa Rosada so that Macri can complete his term. The president asked them "to get on the field and fight" and not to worry because he is going to "stabilize the country." He also made a gesture of support for his Chief of Staff Marcos PeĂ±a, who was seated next to him. PeĂ±a did not speak this time, he listened to the President.
"The Peronists are looking for scorched earth," said Senator Miguel Pichetto, who is Macri's ticket as VP candidate. "I know them from the inside," he said.
The President and his allies paid close attention to the demonstration that was taking place at that moment in downtown Buenos Aires, where social organizations demanded a "food emergency" declaration. The mobilization was defined by the Radical senators as a "counter-demonstration" against the President. On Saturday Macri supporters took to the streets. Radical Julio Cobos surprised his colleagues when he proposed preserving the institutions and meeting in Congress normally.
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