“In summary, we are facing the creation of a relatively complex mechanism, but one that we trust will be very useful,” said the official.
By iProfessional
26/03/2023 – 20,53hs
The Secretary of Economic Policy, Gabriel Rubinstein, defended this Sunday the decree that obliges national public organizations to exchange their sovereign debt in dollars and assured that does not harm to the Anses Sustainability Guarantee Fund and that no debt is taken at 45% in dollars.
In a column published in the newspaper Perfil, Rubinstein detailed how the measure will work and responded to several of the criticisms made of him. As he explained, if the State offers bonds to those who seek to become dollarized through the MEP and the CCL, it prevents the price of titles in pesos from it increases causing prices not to rise as much as in a situation without the participation of the Government.
“The tool will make it possible to have a device that can be used whenever the fears of Argentines lead them to demand dollars as a place of refuge, without generating a cost to society as a whole, since increases in financial dollars cause anxiety, induce preventive price increases, slowdowns in production, impoverishment, etc.”, he opined.
However, the official admitted that the ideal would be to have net reserves to be able to act. “The reserve situation is very weakand this year of drought, the most serious in Argentine history, will take us far away from the possibility of having reserves to appease panic behaviors”, he stated, adding that although next year looks “much better”, it will still be it will be far from being able to count on excess reserves to face situations of stress or exchange and financial panic.
“We will be urging public organizations to carry out tenders via ByMA and MAE in a very transparent and orderly manner, offering the bonds that are being demanded by the market, avoiding an oversupply of bonds in the markets. The mechanism will gain in power as fiscal accounts improve and bond parities improve more and more, there will be more firepower to act in the exchange market,” he said.
Rubinstein dismissed criticism of the measure
Regarding the criticism that the measure received from members of the opposition and former members of Kirchnerism such as Diego Bossio, Rubinstein dismissed the harm to the Sustainability Guarantee Fund (FGS). “The FGS will receive dual bonds, up to 8% interest rate. It will buy them at 60% of their technical value. In other words, the FGS will receive 100 bonds for every 60. This directly implies a revaluation of the FGS portfolio at approximately $2 billion,” Rubinstein said.
Rubinstein also refuted the interpretation according to which the Treasury would be borrowing at 45%
On the other hand, he said that retirees will not be harmed neither because retirements are paid with taxes (social security, VAT and Profits), not with the sale of bonds.
Regarding the sayings that it is a desperate measure to obtain financing for the Treasury, he established that this will not necessarily be the case. “To the extent that AL is placed in the market, funds would enter the FGS and this would give 70% to the Treasury. And yes, in this case, the Treasury would be pre-financing itself. But that will depend on the demand of AL If the CCL stays still and there is no additional demand from LA, the tenders will cease or will be small. And the State will continue to finance itself as it has until now, placing new bonds in the markets,” he defended.
Finally, he also gave up the interpretation according to which the Treasury would be borrowing at 45%. “On the one hand, the Treasury would be borrowing from the FGS with a dual bond, up to 8% rate, that is, very far from that figure. On the other hand, to the extent that AL bonds are placed on the market , and therefore lower bank deposits, would lower Leliq, so that there would be more LA in private hands, without increasing LA’s debt, and there would be more bonds in pesos (the dual bonds to the FGS), with a drop in debt in pesos (Leliq)”, graphed.
“In summary, we are facing the creation of a relatively complex mechanism, but one that we trust it will be very useful to prevent and act against disruptive situations in the foreign exchange market. We cannot operate with dollars because net reserves are scarce. We must appeal to this obviously more complex mechanism for that reason. We will manage it in an orderly and gradual manner, making the greater supply of bonds compatible with the greater demand for them. And there will be no more State debt, nor damage to it, nor damage to retirees, nor to society. The State is made of a tool, which until now it lacked to advance in the macroeconomic order, “he closed.
