Thursday, December 24, 2015

Gov’t issues US$5B bond to pay importers

Exchange rate stays stable as purchases from abroad have yet to fully return to normal

The government will issue bonds worth US$5 billion that will be sold next week to pay back debt from imports during the previous administration, according to a resolution published by the government yesterday.

The figure marks a 150-percent increase on the US$2 billion that President Mauricio Macri’s administration had estimated for the bond issues, but it is still less than the most pessimistic government estimates of the debt held with importers.

Agriculture Minister Ricardo Buryaile said earlier this week the government owed US$10 billion to importers.

The Bonar 2016 bonds offers a six percent interest rate and will be paid out in eight monthly installments between May 2016 and December 2016. The bonds will be issued under local legislation, keeping them safe from any possible court action by “vulture” funds trying to block their payment.

Subscribing to the bond will be optional for all those who are owed money. The government is also offering importers the the alternative option of scheduled cash payments.

Remaining protections

Macri’s administration also gave further details yesterday on how the new system of imports that was made official on Tuesday will operate.

Production Minister Francisco Cabrera said that “sectors such as textiles, footwear, spare auto parts, metals and toys will still be safeguarded by the system.”

The new Integral System for Import Monitoring (SIMI) will keep 1,400 types of products under a system that does not issue automatic import licences in order to protect local businesses.

Almost 90 percent of products will be allowed into the country automatically, Cabrera said.

The new administration argued that previous restrictions were largely in place to artificially prop up the country’s trade balance. Former Economy minister Axel Kicillof, meanwhile, has fired back at that criticism saying that it is normal for the Central Bank to not pay importers right away.

Dollar quiet despite

lower rates

With imports yet to reach a full flow, the country’s exchange rate remained stable yesterday despite the Central Bank’s decision late on Tuesday to lower interest rates.

In the Central Bank’s second debt auction since its new chief Federico Sturzenegger took office, the interest rate on short-term Lebac notes due in 35 days were lowered from 38 percent to 36 percent, while longer term notes due in 252 days saw an even bigger plunge, from 35 percent to 31 percent.

The drop in rates was not enough to counter the big hike that Sturzenegger decided in his first auction, which amounted to more than eight percentage points in some cases. That move was seen as precautionary in the build up to lifting capital controls to try to attract savers who would have otherwise gone to the dollar market.

The Argentine peso weakened by just one cent when compared to the dollar, which was traded at 13.31 in banks and foreign exchange houses.

The black-market or “blue” dollar, however, saw its biggest hike since Macri took office, gaining 18 cents and breaching the 14-peso-per-dollar barrier to settle at 14.10 pesos each, while the blue-chip swap rate also soared 43 cents to 14.33 pesos.

Central Bank reserves increased almost US$300 million to US$24.7 billion.

Herald staff