​The government announced new dollar-linked debt

ARGENTINA - In Brief 02 Oct 2020 by Esteban Fernández Medrano

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In a press conference, the Minister of Economy announced yesterday, accompanied by the Minister of Production Matías Kulfas, the Minister of Agriculture Luis Basterra, the head of the local IRS (AFIP) Mercedes Marcó del Pont and the Deputy Chief of Cabinet Cecilia Todesca new economic measures aimed at incentivizing exports and reduce pressures on the FX rate, and spur economic activity. Main announcement regarding capital markets: 1) Dollar linked debt. In an attempt to channel the economy's excess pesos into a public debt instruments, instead of pressuring the dollar, the government announced that the Treasury would offer again peso bonds tied to the official FX rate. This seems to be an act of resignation or new realism after the various swaps that the government made in the domestic market to dismantle the debt positions tied to the dollar. According to local press, such a new instrument would be already available in the next Treasury bond issuing-date on Tuesday, October the 6th. This new debt follows the hardening of the capital controls, implemented two weeks ago when the government increased the cost of acquiring the monthly allowance of 200 USD by adding a 35% withholdings to earnings. As back then, the objective is to curb the reserve losses of the BRCA. With a spread between the official and informal peso of close to 80%, such dollar-linked debt might be seen by local peso holders as an interesting instrument of protection against a devaluation of the official FX rate. For dolar holders, it is more a bet for a tightening of the FX spread. 2) Temporary reduction in Export taxes. With the objective to accelerate good exports, the government announced until yea...