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Using public resources to pay debt this year
La Nacion
May 14, 2008

Due to the difficulty in placing bonds

By Martin Kanenguiser

Waiting for signs from Venezuela in the coming days, and while the doors in all the voluntary debt markets remain closed to Argentina, the government plans to pay maturities on debt this year with funds accumulated from the national public sector surplus.

Yesterday, Argentine bonds continued their downward trend: the Discount in pesos fell 1.69%; the Par, 2.34%, and the GDP coupon lost 2.4%. Official sources tell LA NACION that in the midst of pessimism and general nervousness over Argentina's financial stability, "the good news is the large amount of resources to be able to place bonds inside the national public sector."

In that sense, they go on to say that the fiscal surplus in April was more than ARG$2.5 billion, with an increase of almost 55% over the $1.617 billion from a year ago, but still under the ARG$2.8 billion calculated by private economists reviewing the Central Bank reports.

Also, according to first estimates, in the first quarter of the year spending was less than previously thought, for which there is additional money on hand for the government. One analyst says that this deceleration in the use of capital resources and the transfers to the provinces "is what explains in part the annoyance by the governors toward the government, beyond the farm sector situation" on the conflict over farm export taxes.

On stand by

From this, the Economy Ministry is putting on stand-by the idea of placing a new bond on the local market and swapping inflation-adjusted bonds for others of longer terms to untangle the bunched-up maturities coming due on public debt in the next three years.

For now, official energy is being put into gathering resources to pay the heavy maturity of the BODEN 2012 next August. After his trip to Venezuela last week, Economy Minister Carlos Fernandez is waiting for a response from the government of Hugo Chavez to see if he will go back to buying BODEN 2015 directly; in principle, Caracas had already announced operations for US$1 billion, but still "lacks political resolve" to confirm them.

To not worsen the angst, officials at Economy opted for programming the finance schedule for this year with greater placements of letters with ANSeS and AFIP, at a single-digit rate, against yields higher than 15% for bonds in pesos.

If the farm conflict is solved, they affirm, the panorama would be untangled and a resurgence could occur for the idea to place a bond with AFJP and local banks. In this sense, Marina Dal Poggetto of the Bein firm said that "with the strong revenues, moderating spending and the flow of refinancing from multilateral organizations, they shouldn't have problems closing out the year."

Hector Scaserra, president of the Arpenta society, argued that the government "is doing everything possible to not obtain resources on the international market, and on the local one it needs some time for the discussion with the farm sector to mature: if it solves it, the mood rapidly changes."

On that, a local market consultant indicated in a report that "while it is possible to pass through 2008 living on our own, for 2009 it will be fundamental to return to the international markets," because maturities will double. In every way, they said, "living on our own" also means dealing with almost the entire investment in infrastructure.