The possibility that the truce in the Middle East coincides with negotiations for a lasting peace in the region could be the kick that Luis Caputo needs to resume the idea of entering the international market in the short term.
The international financial scenario has just given an unexpected turnaround that places the Argentine economic team in front of a window of opportunity which could be decisive for the rest of Javier Milei’s mandate.
The truce reached in recent weeks between the United States and Iran generated a enormous relief in financial markets, reducing the pressures that the war had injected on sovereign bonds for much of March.
The chance that Economy can re-ideate a plan to tempt Wall Street with Argentine debt bond issues It was raised in the last report to clients of the consulting firm 1816, the one preferred by City bankers.
Placing debt on Wall Street: necessity or choice for Luis Caputo?
To understand the relevance of this moment, you have to look back.
Between the end of January and the end of February of this year, Argentina had a clear opportunity to issue debt abroad.
At that time, country risk opened the possibility of placing bonds at a rate close to 10% annually. The GD35 bond was trading at 9.25% in New York.
A level that even allowed countries like Ecuador to return to the market after six years of absence. However, the national government chose not to move forward. Caputo believed that the country risk would drop to a floor of 400 points. At least it was the scenario commented on in public by Javier Milei.
That bet was cut short by the outbreak of the war at the end of February.which triggered the long-term rate in the United States and increased the risk of emerging markets.
The country risk exceeded 600 points a few days ago.
Today, with the de-escalation of the conflict, and awaiting the imminent negotiations between the United States and Iran, the market is once again considering whether the Government will ratify its position of dispensing with Wall Street. Or if, instead, you will take advantage of this respite to strengthen your currency position.
Official rhetoric has attempted to install the idea that Wall Street can be replaced by three alternative sources: privatizations, “alternative” financing (Caputo said the details will be known in a few weeks) and in the local market.
Investor resistance
The latest data suggests that this possible path is not without obstacles.
The recent placement of Bonar 2028 (AO28) – with an even maturity that year – left a bittersweet message: Although it was issued at a rate lower than 9% TNA, the entire US$250 million sought was not awarded.
This shows that the appetite of local investors for instruments that mature in the next presidential term is, for now, very limited.
The urgency to seek external financing becomes evident when analyzing the fragility of the Central Bank’s reserves.
Net reserves are in negative territory (according to the consulting firm at approximately US$1,630 million) and the maturity schedule with the IMF and private creditors amounts to approximately US$24,000 million until the end of Milei’s mandate.
Can the Government pay its debt without Wall Street?
If the Government persists in discarding Wall Street, the economic program would be forced into an extremely demanding “living with our own” dynamic: The Central Bank would be forced to buy large volumes of dollars in the market simply to pay debt maturities.
This is what has been happening: of the US$4,687 million that the BCRA bought in the market since last January 2, it had to sell US$3,658 million to the Treasury to meet debt commitments in hard currency.
Specifically, the (fragile) truce in the Middle East reopened a window that seemed closed.
If the Government decides to ignore it again under the premise that “there are too many dollars” or “they come out through the ears” in the domestic marketwill be betting that the liquidation of currencies in the market will be enough to cover a gap of 24,000 million dollars without compromising exchange stability or the reserve goal.
Wall Street could offer a way out; It remains to be seen if this time the economic team is willing to cross that door.
