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Argentine Debt: the next government will face the maturity of USD 60 Billion

Whoever wins the elections in October 2019 will need to go to the debt market to refinance current loans that are maturing. Advisors estimate that they will need to renegotiate these maturities with the International Monetary Fund

Referred by many to as the lost decade of the Kirchner inheritance, which the current Government of Cambiemos has had to work to disarm the poisoned chalice of a previously controlled exchange rate, widespread subsidies, hyperinflation and various obstacles to normal international trade.

On top of that, they were handed a country that had more trade disputes than all the other countries put together in the Haig and a corruption level that would deter only the bravest or most naive  investors to enter the country.

Now, however, whoever assumes power after the presidential elections in October will have to face debt maturities, between capital and interest with the private sector, that reaches USD 60,000 Billion. If that figure is added to what must be paid or renewed in 2019, the total amounts to about USD 91.2 billion, according to figures published by the Ministry of Finance, with data updated to the third quarter of 2018.

In general, the maturities are always stronger the shorter they are. Therefore, 2019 adds almost USD 32 Billion with private capital and interest.

If we add to these figures the maturities with multilateral and bilateral organizations, about USD 5 Billion this year of capital and other USD 2 Billion of interest, and what is owed by the public sector for USD 9 Billion and USD 3.5 Billion, respectively, the total to be paid in 2019 reaches USD 51.5 Billion.

Due to these large amounts maturing in the coming years, analysts consider it imperative to return to the debt markets after the October elections as soon as possible.

For this year the current Government says it does not plan to do so since with the disbursements of the International Monetary Fund and partial renewal of Letes and Lecap, their needs are covered.

“The question is whether Argentina, after the elections, can regain access to credit to refinance maturities, as if Peronism wins it will not have access to credit due its past reputation of defaults.

In most developing countries maturities are large, but they all have access to world markets to refinance capital.”

Argentina not only wanted to refinance that, but also to finance the fiscal deficit: that’s where credit is likely to be cut.

This is something that the world’s financiers will not do: the fiscal deficit is normally financed by domestic savings “. Santiago López Alfaro of Delphos Investment who said, whoever assumes the Presidency at the end of this year will have to return to the debt markets.

“It’s 100% political: if Cristina Kirchner ( Peronist ) wins, the markets will close and it’s going to be difficult to pay creditors. If another candidate wins that is more market-friendly then there is a possibility of refinancing, but it’s hard to see right now,” he said.

Alfaro described that “clearly today debt and interest payments are a problem, and that is why markets are key, but it is still early days, so, we will have to wait to see how this year works out”.

Faced with the “respite” in Argentine bonds at the end of last week, which began to recover part of their losses and a country risk of around 732 basis points, the situation is still day to day.

“Now the markets are good but we have a lot to do. So far we have had a good recovery, but starting in March it’s a purely local game and an coming election,” he added.

Both Lopez Alfaro and Castiñeira believe that the debt contracted with the IMF, for USD 57.1 Billion until 2021, will need to be renegotiated.

“The assumption is to renew yes with FMI, as there is no other way to return so much money,” said Castiñeira, to which López Alfaro added: “For me, neither Mauricio Macri nor Cristina Kirchner have an option.

They will restructure the IMP Loan, it’s the cheapest and easiest debt to restructure. “

Although until the 3rd quarter of 2018 the total amount of debt decreased USD 13 Billion, from a record USD 321 Billion to USD 307 Billion, the effect of the September 2018 devaluation led when you evaluate it as a percentage of GDP is the highest in almost 14 years of weighing at 95.4% of GDP.

Net of what is owed to the public sector, the debt with private companies, which is what ultimately matters, reached 44.6% of GDP, for USD 140 Billion. Of this total, only 14% is nominated in pesos the local currency.

Source: Translated from La Cronista

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