Fact Check: Argentina

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The inheritance for 2016: debts of US$25 billion

La Nacion

Monday, April 06, 2015
by Jorge Oviedo | LA NACION

From the highest echelons of power it has been said many times that the external debt problem was solved. But Cristina Kirchner is ending her second term without having been able to resolve the conflict with the holdouts and with maturities that in 2016 could reach US$25 billion, which the next government will face.

To determine how many dollars will be needed next year to pay off debt is a complicated account to calculate accurately because the maturities change. The current administration is financed in the short term and gets expensive dollars, which will have to be returned soon. Or it collects hard currency in advance, which means that they will not be collected in the future.

The experts consulted by LA NACION don’t see an easy situation ahead. For now, a few days after taking office, the new president will find himself with the paper that Néstor Kirchner gave the Central Bank when in 2005 he took US$10 billion to repay the entire debt in advance and without a haircut to the International Monetary Fund, as demanded at the time by US President George W. Bush. The Treasury will have to pay the Central Bank that amount plus interest accrued in the period. It is assumed there will be a “refinancing”.

According to private surveys, the next government will need to get US $ 25 billion to make payments or an equivalent amount in refinancings. And besides, the energy deficit must be addressed, which in the Central Bank costs US$10 billion per year.

For example, Javier Milei estimated maturities of US$11.085 billion, net of fees by the country.

But it all depends on what happens on the the debt in litigation with the holdouts.

Jorge Todesca, former deputy Economy Minister and president of the consulting firm Finsoport, says: “The payments in dollars of debt in regular conditions are not significant [but] the question that raises an important question is how much the payments to holdouts who have won the trial in New York will be, which is being added to the list under the mechanism of me toos and for now are in a situation of expectation. The figures that have recently been released as the widened amount from the Griesa ruling comes to US$7.1 billion, and the government estimates a potential final estimate of claims of US $ 20 billion.”

Nadin Argañaraz, president of Iaraf, meanwhile, noted that “during 2016 a total is coming due of US$25.015 billion related to the debt from the national non-financial public sector.”

This amount consists of US$17.338 billion in amortizations and US$7.677 billion in interest. In turn, US$18.358 billion is payable in foreign currency, while US$6.658 billion is for maturities denominated in pesos.


Normally, when there is market access and a good fiscal situation, principal maturities are refinanced and interest paid from the primary fiscal surplus. But that is not the situation in Argentina today. What will it be next year?

Daniel Marx, a former Finance Secretary and president of Quantum Finance, he estimates a devaluation in 2015 of around 35% and CER adjustment index for the indexed debt in pesos of around 25%. The account of maturities for 2016 come to, again, US$25.625 billion dollars.

Of course, they assume a refinancing the debt with the BCRA and the more than US$2 billion with international organizations.

But Marx adds the Nobacs, which are going extinct this year because they are observed as being renewed and impacting next year. “We see that as financing that is ending at the Treasury, now that the Central Bank is giving it money (pesos or foreign currency) which partly absorbs its monetary impact seeking funding that the Treasury does not directly take,” he says.

Marx estimated that there will be some payments of an eventual agreement with the holdouts for interest, now that, he estimates, there would not be a first payment of amortization of principal. That means they are more or less optimistic assumptions.

Exhausted model

Todesca also distinguishes between three kinds of debt, according to whether or not it will continue being refinanced and increased.

The alternative of continuing with internal financing through placement of securities such as Treasury Lebac and advances, is considered to have been “exhausted”. But he stresses that “the possibility of obtaining external financing in foreign currency is big, because the total stock of debt is small relative to the size of the economy and the maturities are very phased over time.”

Another thing is the debt with bondholders still in default, as everyone seems to agree. “The big challenge will be to resolve the issue of the holdouts as quickly as possible, and that certainly will be a priority on the financial agenda of whoever governs from December this year,” said Todesca.

Part of what is settled by the current government will be paid by the next. Argañaraz estimated US$2.507 billion in payments for the agreement with the Paris Club and U$423 million for payment to Repsol for the expropriation of YPF.

Without any mechanism allowing access to the voluntary debt market, it seems difficult to maintain the pace of demand for foreign currency. The trade balance is very damaged, with falling exports as a result of the sharp decline in international commodity prices.

In any case, the inheritance will be far from that of a country with its debt all settled. More than twelve years of leadership have not been enough for Kirchnerism and its follow-on, Cristinism, to completely exit the default they started with when they arrived at the Casa Rosada in May 2003.

View Original Article: La herencia para 2016: deudas por US$ 25.000 millones