2023-07-29 01:26:12
The headquarters of the Development Bank of Latin America-CAF, formerly the Andean Development Corporation (CAF), in Caracas, Venezuela (EFE/Harold Escalona)
This afternoon, the Development Bank of Latin America, known as CAF, authorized a $1 billion bridging loan that Argentina will use to pay the International Monetary Fund next week.
The vote, which was followed by the Minister of Economy, Sergio Massa, ended 20-1 in favor of the country; Peru did not vote.
Yesterday, the country asked a Caracas-based development bank for a bridge loan to help the country cover its debt to the IMF until its board of directors approves the refinancing of the program, which would unlock additional disbursements of funds.
Massa made the request on Thursday to the CAF requesting that it call an extraordinary meeting on Friday to deliberate on the requirement. In the letter, Massa pointed out that Argentina has already reached an agreement with the IMF technicians, something that was made official this afternoon.
This morning, Economy assured informally that there would be “bridging operations” with other multilaterals to pay next week’s maturities. On Monday, July 31 and August 1, that is, on Monday and Tuesday of next week, maturities will fall for almost USD 3,500 million, between USD 2,660 million of capital and USD 830 million of interest.
At the moment, only the new credit from CAF has been confirmed. The other USD 2.5 billion could come from other multilaterals, as they said at the Palacio de Hacienda, or yuan that would arrive after an extension of the current swap with China.
CAF had around USD 30 billion in outstanding loans at the end of the first quarter of this year and Argentina is already one of its largest creditors, with USD 4.1 billion in loans.
The possibility that the Government would face expiration dates with other organizations and “bilateral” agreements was expressed by the Monetary Fund itself when it communicated the technical agreement reached with the Argentine economic team. The money will be reimbursed when, after the STEP, the agency’s board of directors meets and approves the disbursement.
It is not yet clear how that turnaround will impact reserves. This is because both the CAF loan and the yuan or another alternative under negotiation with multilaterals do not necessarily require an immediate repayment. In other words, it is not known how extensive the negotiated “bridge” is.
If there were a longer term, then the reconstitution of reserves could reach negative USD 3,700 (of the -USD 10,000 that is calculated to be reached on Tuesday after the payment, assuming the activation of the second tranche of the Chinese swap), which in any case remains very far from the goal of accumulation of reserves foreseen for December, of USD 3,300 million of stock.
“A relevant point is whether China (and eventually international organizations if there is a bridging loan) will demand the repayment of payments once the IMF SDRs are disbursed. If this does not happen, the BCRA could recompose ammunition to sustain intervention in the exchange market during the electoral period, although this will depend on the possibility of converting the SDRs to liquid dollars”, it was explained in the analysis report of the agreement with the IMF of the consulting firm founded by the former president of the Central Bank, Luis Caputo.
In the opposite scenario, if the Government is forced to return in the short term the funds used to pay the IMF in the coming days, the room for maneuver will be much more limited, increasing the chances of a discrete jump in the exchange rate before December.
Keep reading:
The IMF will evaluate the result of the country’s measures to adjust spending and increase reserves until the disbursement in August How was the “K landing” at YPF and who were the opponents who voted in favor of the expropriation Massa spoke about the agreement with the IMF : “It allows us to go through the second part of the year with much more peace of mind”
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With information from Bloomberg
News in development
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