The Central Bank (BCRA) published today an “unusual” report to note that the obligation imposed since 2020 on local companies to restructure the debt they had contracted with external creditors – in force at least until the end of this year – allowed them to “save” (actually they were postponed) US$26,635 million in payments that would have had to be done and avoid “a generalized crisis of defaults”.
The document, which was not announced on her calendar, appeared after Vice President Cristina Kirchner days ago demanded that President Alberto Fernández “use the pen” after denouncing, among other things, that “there is a national sport to seize the reserves that there is in the Center”in obvious reference to the notable problems exhibited by the BCRA to buy reserves despite a record level of exports.
Given the “veiled” accusation of inefficiency in this regard, translated even by the usual spokesmen for the Patria Institute, the monetary entity’s document provides detailed information on the different movements in the exchange account. Hence, it was interpreted in the market as a response to the criticisms that arise from the ruling party itself.
The BCRA seems to admit something of this in the preamble to the report it released.
“Private sector foreign debt payments and their impact on the exchange balance have attracted the attention of analysts in recent weeks,” he conceded, although he warned that the correct quantification of the process “requires a detailed understanding of the statistics and recording methodologies of the exchange balance as well as the set of regulations that affect companies’ access to the foreign exchange market”.
There he pointed out that the cancellation of external debt of the private sector in the last biennium should be seen as “the other side of the cycle of indebtedness in foreign currency opened in the last years of the past decade.”
“Between the end of 2015 and 2019, companies increased their external financial indebtedness by more than US$20,000 million, reaching a global volume of US$45,045 million, accompanying the scheme of deregulation policies and high domestic interest rates,” he described.
This “high burden of private foreign debt maturities forced the BCRA to establish a set of regulations that limit access to the foreign exchange market for this concept, in order to avoid a demand that could be disruptive for the operation of the foreign exchange market”, held.
That’s when you remember that The foreign exchange regulations established for this type of liability avoided payments of US$12,756 million for all the debt with related companies and US$13,889 million for debt maturity restructurings with non-related companies. That is, the total of US$26,635 million mentioned above.
“Of a total of obligations payable in the period for US$32,000 million, US$5,367 million were paid, 17% of the total,” he detailed.
According to the BCRA, the regulations applied to these debts “not only did they seek to save a considerable volume of foreign currency” so as not to further affect its weak reserve position, but rather to “preserve the continuity of the companies. “If access to the official exchange market had been closed, it would have led them in some cases to a situation of bankruptcy, making it impossible to access credit for refinancing and exposing themselves to hostile purchases” at very low prices that would have “opened a process of foreignization of the productive apparatus.
The entity led by Miguel Pesce was also concerned to clarify that, although the exchange balance information reflected between January 2020 and April 2022 net outflows for the concept “Financial loans, debt securities and lines of credit” for a total of US$14,405 million, “Net payments in foreign currency made by companies were considerably lower, reaching US$5,367 million.”
“This is so because the concept ‘Financial loans…’ also includes debts for credit card payments abroad, cancellations of financial loans in foreign currency granted by local financial entities and payments of foreign loans and titles. debt of the provinces”, he assured.