Javier Miley’s government announced on Friday that Argentina will return to international financial markets to assume debt, through four-year dollar bonds with a 6.5% interest rate. The government aspires, with the proceeds collected, to be able to partially meet the debt maturities for next January, amounting to about $4.3 billion, without affecting the Central Bank’s meager reserves. The decision comes hours after the International Monetary Fund once again called on the South American country to pool international reserves to strengthen its unstable financial system.
Miley celebrated on social media, saying: “We have returned to the capital market with bonds in 2029 with a 6.5% coupon under local law.” The president praised Economy Minister Luis Caputo, who announced the decision. As usual, he described him as “the best ever.”
Argentina has remained outside global financial markets since 2018 to avoid the higher interest rates it would have to face. JPMorgan’s country risk index – which measures the spread a country’s bonds pay over their US counterparts – assigns Argentina 622 basis points. Its fluctuations have been a sign of instability in the South American country this year: in January, the index approached 500 points and in September, in Milley’s worst political and economic moment, it exceeded 1,400 points.
After her strength was strengthened after winning the midterm elections, and after she was rescued by the International Monetary Fund last April, and by the government of Donald Trump in September, Miley is now betting on restoring the confidence of international investors in her plan to adjust financial conditions and free the economy from regulatory restrictions.
“We will come out with four-year bonds until November 2029 with a coupon,” Caputo said on Friday in an interview with the channel. “It is very important information because of what we were talking about about the accumulation of reserves.” America 24. He added: “The idea is to pay January dues without reducing reserves.” In addition to the reward, the minister hopes to obtain a loan from private banks.
Official information shows that the new bond, BONAR 2029N, is denominated in US dollars, has a coupon of 6.5% per annum with semi-annual payments and the principal will be fully amortized upon maturity, on November 30, 2029. Subscription and payment will be made in dollars under Argentine legislation. The final price will depend on the deposit price set at the auction scheduled for Wednesday the 10th of this month. The process will be decided after two days.
The Finance Ministry’s statement highlighted, as Caputo did, that it was the government’s idea not to use the central bank’s scarce reserves (BCRA) to repay debts. He stressed, “In the context of strong pressure on interest rates on dollar bonds as a result of the election result and the continued performance of the economic program, the Treasury seeks to expand its financial targets to cover dollar debt maturities without affecting the central bank’s net reserves.”
Although the central bank’s total reserves amount to $41,882 million, net reserves – after deducting current swaps with China and the United States, among other liabilities – are negative. For this reason, the International Monetary Fund has repeatedly demanded that Miley’s government obtain foreign currency. On Thursday, multilateral spokeswoman Julie Kozak praised Miley’s economic plan, but called for a “more ambitious path to reserve accumulation” to “help Argentina better address shocks” and “facilitate the re-access to international capital markets in a timely manner.” So far, Argentina has failed to meet reserve targets set in its $20 billion agreement with the International Monetary Fund.
Miley’s government has refused to acquire foreign currencies to avoid encouraging an increase in the domestic price of the dollar, a highly sensitive variable in the Argentine economy. This was in an interview organized by the newspaper on Wednesday HistorianThe extremist president stated: “What is this thinking that I should have reserves to pay (the debt)? If I pay the interest with the balance and the debt is there.” Rollo (Refinancing) in the market.”