Argentine Economy Minister Luis Caputo speaks during a news conference in Buenos Aires, Argentina, on Jan. 10, 2024.MATIAS BAGLIETTO/Reuters
Argentina’s government launched a huge voluntary debt swap on Monday of peso and some dollar-linked instruments set to mature in 2024, a bid to push back repayments amid a major economic crisis hammering the South American country.
The debt, which includes 15 different instruments with a total value pegged at around US$65-billion, may be exchanged for new inflation-linked instruments with maturity dates ranging from 2025 to 2028, according to the government.
“The eligible securities in the hands of the public and private sector for the swap operation amount to some 55 trillion Argentine pesos [US$64.86-billion],” a government source said, adding 70 per cent of the maturities were held by the public sector.
Argentine sovereign bonds, which have been on a rally this year driven by market hopes about new libertarian President Javier Milei’s reforms and fiscal tightening, dipped on Monday by an average 0.5 per cent.
The government opened the auction process on Monday morning and will close it on Tuesday evening. Settlement of the offers received and awarded will take place on Friday.
Ezequiel Zambaglione from local investment platform Balanz said the swap was a test of investor confidence in the government and a strong take-up could boost markets further.
“If there is significant adhesion from the private sector it could have a positive impact on dollar bonds and stocks because it would be a reflection that the economic program continues to gain credibility,” he said.
Mr. Milei is battling to restore economic stability with a tough austerity and cost-cutting drive, which has helped improve the fiscal balance but dampened growth and economic activity.
The grains-producing country is also grappling with inflation running at over 250 per cent, poverty that is climbing toward 60 per cent, depleted central-bank foreign-currency reserves, and a myriad of currency controls to protect the embattled peso.
In an interview on Monday, Mr. Milei said his plan for a “zero deficit” this year was non-negotiable, even as he faces tough talks with lawmakers and governors to push forward his economic reform plans. He added that March could be a “complicated” month.
“If we tame inflation and undo currency controls, economic activity will rebound,” he told local media, adding that he aimed to unravel controls by “the middle of the year.”