News Martín Guzmán, on the negotiation with the bondholders: Today...

Martín Guzmán, on the negotiation with the bondholders: Today the dialogue is going where we want it to go

Guzmán said that the creditors have not yet presented a counterproposal, as reported by Ámbito today, and that the talks with continue beyond the original offer, which implied a three-year grace period, capital drawdown and a sharp reduction in interest. “The main thing is that the agreement is sustainable. We want to make Argentina a good debtor that can meet its commitments. And there are multiple combinations of the parameters of an offer that are consistent with the idea of ​​what we call restoring sustainability, ”he told the Spanish newspaper.


On the other hand, he referred to the price of the dollar and attributed the sharp escalation in recent days to the macroeconomic instability in Argentina as a consequence of the negotiation with the bondholders.

On Wednesday, the blue dollar or free dollar exceeded $ 130. It stretched the gap with the “solidarity” dollar, which closed at $ 90.67. The exchange rates associated with operations on the Stock Market also rose: the cash settlement reached $ 127 and the MEP to $ 122.

“We maintain the official dollar at a stable and competitive real exchange rate,” replied the minister. “Argentina continues in a situation of instability. The official change will move with inflation. Under conditions of macroeconomic stability, stability would also be generated in alternative exchange marketsGuzmán said.

Next, the entire interview:

Question. His plan was to reach an agreement with private creditors before the end of March. He then extended the deadline until May 8. And now the new limit is May 22.

Answer. The coronavirus affected all logistics. It is very different when the dialogue between creditors and the Government is carried out by videoconference. The fact of not being in person conditions the process.

P. His offer received very little support. Who owns the initiative now?

R. Argentina made its offer after what was a process of dialogue and these days we try to deepen understanding.

P. On the same offer that implies three years without paying, deduct the principal and a strong reduction in interest?

R. It’s an offer. The bottom line is that the deal is sustainable. We want to make Argentina a good debtor that can meet its commitments. And there are multiple combinations of the parameters of an offering that are consistent with the idea of ​​what we call restoring sustainability.

P. Have creditors made any counterproposals?

R. No.

P. The Argentine Central Bank is printing large amounts of pesos but inflation is trending downward, which indicates deflationary pressure. What is going to happen?

R. In Argentina, as the objective was to prioritize health in the face of the pandemic, we decided to strongly restrict the movement of people. The quarantine greatly affected economic activity and has a significant fiscal cost, in a context in which Argentina lacks access to international credit. With the country emerging from quarantine, the need to sterilize part of the money creation is created. That is already happening. In fact, Argentina is entering a positive dynamic in the development of a public debt market in pesos that was closed in December.

P. The international context is rather deflationary. Can this help creditors to think that the offer is not so bad, given the low international interest rates?

R. Argentina proposes to pay an average coupon of 2.3%. That has to do with what Argentina can do, more than with what is happening in the world. But it is true that global interest rates are very low. If our offer were accepted, Argentina could meet its commitments and our creditors would have a realistic return. We cannot face the average coupon that Argentina pays today, of 7%.

P. Are the three-year grace period negotiable?

R. There was a lot of discussion about it, that was a critical parameter for our creditors. The IMF debt sustainability analysis suggested a grace period of five years, in the negotiations we proposed four and given the importance of this parameter we lowered it to three years. It is a process that continues.

P. The large funds that invested in Argentine debt coincide in pointing out that they lack an economic plan.

R. We have presented it and it is public. A few weeks ago I was talking to a great former Argentine Minister of Economy and he told me that the same thing happened to him when he participated in a process of debt restructuring. They said to him: “There is no plan.” And he warned me: “They are going to tell you that there is no plan as long as it is not the plan they want.”

P. Technicians from the International Monetary Fund point out that Argentina decided to negotiate with private creditors earlier than with them. Having seen the results, do you regret it?

R. It has to do with a question of timing. Strong tranches for debt repayment with the IMF [sobre un total de 44.000 millones de dólares, 40.500 millones de euros] They fall between 2021 and 2023. In contrast, in 2020 we had to face very large payments to private creditors.

P. Suppose that on May 22 there is an agreement with the creditors. What happens then?

R. The horizon consists of a productive structure capable of satisfying a set of conditions at the same time: guaranteeing work with inclusion; generate dynamism and competitiveness, something that we have always had problems with; and achieve macroeconomic stability, with an increase in exports that is consistent with GDP growth in real terms. Argentina has historically experienced boom periods followed by declines, recurring balance of payments crisis, sovereign debt crisis. This instability destroys employment and generates social exclusion. In Argentina, 40% of the population is in a precarious job situation and 52.3% of boys under the age of 14 suffer from poverty.

P. If Argentina does not pay external debt for three years, it will accumulate large reserves in dollars.

R. Argentina has a problem of integration in international markets related to several factors. One of them is very rigid capital controls, implemented in August 2019 in a context of high anxiety in the economy. Argentina needs more flexible regulations. For this we have to build robustness, accumulate reserves that sustain an internal debt market in pesos, a very important factor for the country to borrow in its own currency.

P. Meanwhile, the peso continues to devalue against the dollar on the free market.

R. We maintain the official dollar at a competitive real exchange rate [69 pesos por dólar] and stable.

P. But the unofficial is close to 130 pesos per dollar.

R. Argentina continues in a situation of instability. The official change will move with inflation. Under conditions of macroeconomic stability, stability would also be generated in alternative exchange markets.

P. What if there is no agreement on the 22nd?

R. Argentina is in this process of debt restructuring because it has no ability to pay. And Argentina is going to work until the agreement is reached. Clearly, there is still an important way to go to reach an agreement.

P. Has dialogue with creditors improved after the first tranche of the negotiations failed?

R. Yes. Then we have to see how fast it is developing, but today the dialogue is going where we want it to go.



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