Market news | 30 August, 2019

The Argentine authorities seek to extend the maturities of government debt

Diego Balsa Portfolio Manager

The importance of diversification for investors

The debt levels of governments and companies with respect to GDP are at a record levels, something we should take into account when investing

The Argentine authorities seek to extend the maturities of more than 100 billion dollars of government debt, which includes over 50 billion of the International Monetary Fund (IMF).

The government tries to carry out this measure as a result of the important liquidity problems that it has faced for months and that has been substantially aggravated during the last weeks, as a result of the collapse of the Argentinian peso and the price of its debt issues.

The main factor that has stressed Argentine assets during the last days are fears that Macri will lose power in favor of Alberto Fernández, after the results of the primary elections, in which the candidate of Kirchnerismo achieved a very wide advantage (15%). The results are not binding but they significantly feed investors’ fears that the result will be repeated in the elections on October 27.

Since the results of the primaries were released, the authorities have tried unsuccessfully to contain the depreciation of their currency. Additionally, the country’s foreign currency reserves have collapsed during the month of August.

The idea of ​​the government is to postpone the payment of 7 billion short-term debt issued in the local market and held by institutional investors. They will also ask foreign investors to “voluntarily” extend the maturities of their debt. In relation to the IMF, which they requested a bailout just a year ago, they will also try to delay the loan repayments for an amount of 56 billion dollars.

The IMF officials, who this week have been meeting with the political authorities and the opposition in Argentina, have declared that they are analyzing the recently announced measures.

Argentine Economy Minister Hernan Lacunza has stated regarding the measures that seek to ease the debt burden that “this is due to short-term liquidity tensions and not to problems with the solvency of the debt.”

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