Argentina must reduce its bond yields before returning to international capital markets in a process that will likely take some time, Economy Minister Martín Guzmán said on the day the country concludes a US$65-billion debt swap.
In the shorter term, it will continue to work with the one percent of bondholders who did not accept the government’s debt restructuring offer, he added.
“We need to work on consistent macroeconomic management to decrease the yield to levels that we consider acceptable. And again, that will take time,” Guzman said in an interview with Bloomberg Television on Friday. “The government will not need to access the international market for a while.”
Argentina managed to exchange 99 percent of its old bonds for new ones, clearing the way for the country to emerge from its ninth default in history. The government said earlier this week that it would issue a total of US$63.2 billion in new dollar-denominated bonds as part of the exchange, and 4.18 billion euros (US$5.01 billion) of debt denominated in the single currency.
The new dollar bonds are yielding about 11 percent in unofficial, over-the-counter trading, according to traders.
Argentina will also continue to work with the retail bondholders in Europe who hold the one percent of debt that wasn’t included in the agreement, Guzmán said during the interview.
“The remaining one percent, we will continue working on it, it’s mostly a technical issue,” the minister said of the holdouts. “There were some retail bondholders that were registered in Europe that did not get chance to vote but we don’t see that as a problem.”
After the restructuring, Guzmán and his economic team must negotiate a new programme with the International Monetary Fund to replace a failed US$57-billion bailout granted to the country during a previous government. The new IMF plan will be sent to Congress for approval before the deal is signed, Guzman said.
All options are on the table for the programs with the Fund, including two types of aid packages known as a Stand-By Arrangement and Extended Fund Facility, he said, adding that the new deal will be different from the previous one because it will be based on different premises for economic policies.
The 2018 IMF programme “deepened the recession. Now we are moving forward to a different kind of programme,” he said.
President Alberto Fernández is expected to lay out his long-awaited fiscal, monetary, and foreign exchange policies with the new annual budget proposal that will be sent to congress by September 15. Argentina is suffering its third straight year of recession with the economy poised to contract 12.5 percent in 2020, on pace for the worst one-year decline on record. Unemployment is above 10 percent and inflation hovers over 40 percent.
by Patrick Gillespie & Jorgelina do Rosario, Bloomberg