Argentina: State companies must exchange dollar bonds for pesos – 03/23/2023 – Market

The government of Argentina ordered state-owned companies to sell or exchange their bonds in dollars for new instruments in pesos, as a measure to curb the drop in international reserves, in a context of scarcity of foreign exchange and exchange rate volatility in the financial sector.

The measure was taken by decree this Thursday (23) and covers, in a first phase, about US$ 4 billion (approximately R$ 21 billion) in securities.

“In a sustainable way, the State will gain capacity to act in the financial dollar markets, which will allow it to avoid disruptive increases”, said the deputy minister of Economy, Gabriel Rubinstein, in a message on Twitter.

These measures “will allow you to have greater availability to, if necessary, stabilize the markets, absorb possible monetary surpluses and continue fighting inflation”, which was 94.8% in 2022 and exceeded 100% in 12 months in February. Higher prices are one of the main obstacles facing Alberto Fernández’s government.

With this decision, an attempt is made to “strengthen the macroeconomic order” while Argentina is going through a difficult scenario due to the lack of foreign exchange, in a year of drought that compromises agricultural exports — the main source of dollars for the country.

Since 2019, Argentina maintains an exchange control system. In January 2022, the country established the restructuring of a debt of US$ 44 billion (about R$ 230 billion in current exchange rates) with the International Monetary Fund (IMF), which forced it to strengthen its reserves.

According to the latest Central Bank balance sheet, gross international reserves total US$ 37.6 billion (almost R$ 200 billion), but the level of net reserves is much lower, according to analysts, if bank reserve requirements and a swap with to China are discounted.

In this context, the government aims with the new measures “to continue reducing the probable monetary surpluses, stabilizing the exchange market and strengthening the financing of public coffers, paving the way for the fulfillment of the financial program of 2023”, says one of the decrees.