The Minister of Economics Luis Caputo he announced that The government will seek to obtain about $1,000 million in the placement of a new government bond in dollars, and that hopes a Interest rate less than 9% per year.
The head of the Finance Palace told investors this at a meeting of the IEB Foundation. He assured that this amount and the financial costs are the “central objective” that the economic team has set for this debt operation.
“We want to raise a billion US dollars, with an interest rate of less than 9%, that is our goal,” said Minister Caputo. And he added: “The idea of this new bond is to show the market that country risk would be different if we had more conventional bonds,” he added.
It will be that first issue of a dollar title since January 2018, and with what you receive you will face ruin $4.5 billion to be dealt with in January, with the aim of not using the central bank’s reserves. The security will be called BONAR 2029N, with a maturity of four years (until November 2029 during a new presidential term), a semi-annual coupon, an interest rate of 6.5% and a principal payment at maturity.
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At the event, Caputo explained that the upcoming offering is part of and encompasses a broader financial strategy discussions with international banks, that “they offered $7 billion” as a direct loan (repo).
Exchange rate system and accumulation of reserves
The minister then focused on the exchange rate system and the discussion with the IMF. He assured that “There is consensus” with the organization to preserve the bands and explained that “We will not leave the bands or push the dollar higher” he said in conversation with IEB President and Founder Juan Ignacio Abuchdid.
He explained that the government had in some way tried to accumulate reserves “neat and cheap”pointing out that this did not mean a large issuance of pesos and rejected the idea of an immediate release. As he described, The bands “have gained a lot of credibility” and “they have withstood a historic attack,” which is why he believed the plan “will continue and provide security.”
Caputo argued that the accumulation of reserves must be accompanied by the increase in demand for money. He warned that An accelerated purchase would mean a problem that is not confirmed by the public And “It would create inflation”in addition to the financial costs of sterilization, which the BCRA should carry out through compensated liabilities that pay an interest rate.
And he described the potential scope for rebuilding reserves: With the same monetary base ratio expected next year, there would be scope for acquisitions “Seven billion dollars”a number that would double if the ratio to GDP increased by one point.
In any case, he clarified that an adequate supply of foreign exchange is also necessary, recalling that the foreign exchange market operates “less than 200 million dollars a day,” partly because many agents have “advanced” and They dollarized positions before the elections.
Reduction of withholding tax on exports
The Minister of Economic Affairs also referred to the Reduction of withholding tax on agricultural exports announced by the state government.
In this framework, Caputo assured that “the national government’s commitment to rural areas has existed from day one” and that “It is a pleasure and a pride to be able to continue to give back to this sector for all it has given over so many years.”. “There is still a long way to go, but soybeans are down from 26% to 24%, soy byproducts from 24.5% to 22.5%, wheat and barley from 9.5% to 7.5%, corn and sorghum from 9.5% to 8.5% and sunflower from 5.5% to 4.5%,” Caputo said, noting that “to the extent that we have some wiggle room.” prosecutor, We will continue to reduce taxes; “Macroeconomic stability and reducing regulations and taxes are the best industrial policy there is.”
In this sense, Caputo expected that through the labor reform that it will submit to the National Congress, the government will seek to “further reduce taxes to ensure that the economy continues to grow, and with greater formality.” In this way, he expected that “a regulation will be proposed to facilitate the dismissal process or mutual agreements that are crucial for the recruitment of new workers.” “There is also a new employment regulation for small businesses”he added.
At the end of the meeting, IEB Group Founder and President Juan Ignacio Abuchdid presented Caputo and his team with a recognition for their management at the Ministry of Economy.
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