Sunday , October 24 2021

Markets, attentive to a country of risk already in 832 bp


Much has been written to try to explain the possible causes: the political risk represented by Wall Street for an eventual return of Cristina de Kirchner; the macro risk to the inconsistencies of the economy, which wins the presidential elections of 2019; the financial income tax

Dissecting the indicator does not matter. What is important is what he is saying: he expresses doubts that the country can count on sufficient resources to deal in a timely manner with debt commitments beyond 2019.

Argentina has made a possible default this year thanks to the IMF's mega loan. The US $ 57.1 billion was granted in an extraordinary way to the country to buy time and to carry out the structural reforms that did not make in the first two years of the government of Cambiemos.

These IMF dollars add up to those who, since 2016, have approached international funds, relying on the fact that in a few years the reforms that Maurício Macri would implement would lead to a scenario of macroeconomic consistency and debt revaluation.

None of this happened. Today the country lives financially thanks to the IMF's lungs. The disbursements of stand by cover in principle the financial needs of 2019. But the Fund will remove the wheels for the Argentina bike in 2020 and from there they will send the numbers of reality.

Argentina has a primary deficit of US $ 8887 million per month, according to official data from November. The farm promised to reduce it to zero by 2019. Many in the market allow themselves to doubt this goal: they do not remember something similar in an election year. A longer recession would complicate collection estimates and the El Niño current would affect the production of field dollars.

The financial deficit, which includes the payment of interest on debt, in turn, totals US $ 1,915 million. According to the Central Bank's foreign exchange balance, the outflow of US dollars in interest was catapulted in recent months: US $ 390 million in September, US $ 980 million in October and US $ 1,261 million in November.

The need for annualized financing for the all inclusive deficit would exceed US $ 33 billion. The table presented to the IMF in the last revision recognizes a difference of US $ 26,208 million for the next year.

Of course, this account represents an important renewal of private maturities, a strong supposition for the debt whose rollover falls after the August primaries. And, in addition, it foresees the use of international reserves for US $ 7,733 million.

In the middle are the presidential elections. Although the candidates have not yet been defined, the research has two options: a populist, interpreted by Cristina, and another one of continuity of the market rules, represented by Macri.

On Wall Street, they associate Christina with a repudiation of debt and a return to the controlled economy. Perhaps they see the other side in Macri, although in case they are re-elected, the current president will be forced, in better ways, to renegotiate the commitments, with the IMF and private creditors.

The result would be the same. It's no coincidence that the CDS price is above $ 800. And debt maturing in the first half of 2019, such as AA19, yields as a triple A bonus, and maturing in 2020 exceeds 11% (AA21) and peaks at 15% a year (AY24).

The decision to dismantle the portfolios no longer seems to be related to a more or less harsh regulation of the financial income tax. In addition, it could be accentuated after the December 31 photo, which allows you to avoid personal assets.

Some argue that the punishment of the bonds was excessive and inconsistent with a dollar at $ 38. He is mindful of how this will be resolved: either the risk decreases and yields fall or the exchange rate rises.

Everyone is concerned about the escalation of country risk. It is the mirror that reflects the fall of Argentine securities, which were bought by private and institutional investors and are part of the capital of financial institutions. In fact, the question they ask is: how country risk is reduced?

The best answer may be to cast doubt on whether the country can fulfill its obligations beyond 2019. And for that there are only a few possible ways, as experts predict a difficult international context for countries. emerging markets in the next two years.

Having discarded the adjustment to correct macroeconomic inconsistencies and the arrival of new private financing, only a more explicit IMF commitment would be available than "if Argentina needs us to be there."

That's a lot, but if I could, what a market group would ask the Magi would be an IMF announcement considering a precautionary agreement of sufficient magnitude to meet the needs of 2020 and 2021 and thus fuel the spectrum of default. . It is, of course, conditional on the continuity of monetary and fiscal policies and the implementation of pending structural reforms.

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