Importers purchased 9% of the bond the Central Bank had designed specifically for them to pay their debts in U.S. dollars. The initial bid on the first series of Bonds for the Rebuilding of a Free Argentina’s (Bopreal, by its Spanish acronym), which began Wednesday and ended Thursday, saw 34 offers amounting to only US$68 million. The Central Bank announced it will hold another Bopreal bid on Friday.

The Central Bank expects to hold periodic Bopreal bids until the end of January. In light of this, some analysts have called for waiting until then before judging the instrument’s performance. 

The government introduced the Bopreal saying it was the solution to a problem inherited from the previous administration. During the last stage of Alberto Fernández’s presidential administration, the Central Bank failed to provide companies with U.S. dollars due to an international reserve shortage (net reserves, at negative US$10 billion, are still historically low). 

In an effort to not halt economic activity, Fernández’s government allowed them to purchase goods and services on credit, with the promise that they would be provided the currency to cancel these payments. The debt companies have with their providers — which in some cases are their parent companies — ballooned to approximately US$30 billion.

The Bopreal was created as a bond that could be bought in pesos only by companies that had acquired debt with their providers until December 12. It will be paid for in U.S. dollars. The Central Bank will issue three series of bonds, each maturing at a different date. The administration’s goal is to try and push importers to the longer-term ones in order to shrink demand for foreign currency as much as possible in the short term. 

The first series of the Bopreal will have a 5% interest rate and will mature on October 27, 2027. The second and third series, with a 0% and 3% interest rate, are set to be paid on June 30, 2025, and May 31, 2026, respectively.

According to Galicia Bank’s invest-tech Inviu, the government will use the Bopreal to clear U.S. dollar payments in the short term. This is meant as an instrument to help lift exchange restrictions as quickly as possible and to absorb pesos to reduce “monetary surplus,” which also hinders the possibility of loosening capital controls.

The bonds have a variety of sweeteners — the first and third series will be negotiable in the secondary market, and a Central Bank resolution issued last week allowed companies to use them to pay for taxes. Those subscribing to Series 1 until January 31 were also offered an exemption from the PAIS tax.

However, the first bid failed to attract importers en masse, at least for now. Gustavo Quintana, an analyst and broker for PR Corredores de Cambio, told the Herald that importers have to sign up for a registry of commercial debt with foreign countries in order to subscribe to the instrument. 

The Central Bank, however, issued the first series before having the complete registry. Gustavo Caamaño, an economist at Ledesma consulting firm, added that the low difference between the official and the parallel exchange rates conspired against the attractiveness of an instrument like the Bopreal for importers.

“We will see how things continue; if imports take off and the gap [between exchange rates] goes up again after the seasonal peak, things could be different,” he said in a post on X. A higher gap between the official and the blue-chip swap rate could make the instruments more profitable.

Economic analyst Carlos Schwartzer told the Herald that some companies were inhibited from biding on the Bopreal due to restrictions enforced by the previous administration, but these could be eventually lifted. Asked for other possible reasons why the first round ended with such low results, Schweitzer said that the market could be asking for a better interest rate or that companies may not have that much liquidity.

After the bid, the Central Bank granted more benefits to importers who decided to buy the bond. It extended their possibility of accessing U.S. dollars in the official exchange market to pay import debt until January 31. The maximum amount will be 5% of the nominal value of the Series 1 Bopreal they acquire in primary bids if the amount of this instrument is at least 50% of their total debt. The Central Bank will also allow importers who buy Bopreal to access foreign currency as of April 1, 2024, through the sale of securities.

While some critics deem the move the beginning of a dollarization process, at least for the Central Bank’s portfolio, others see it as a way of nationalizing private debt at the official dollar rate, noting that some of that debt is with the importers’ parent companies.

The Argentine Confederation of Medium-Sized Companies (CAME) has a different vision. José Lopetegui, CAME’s head of international trade, told the Herald that although the Central Bank failed to provide importing companies with dollars, they still made them pay for import taxes.

“I had the money to pay for U.S. dollars at the rate the government said, but they told me they didn’t have them,” he said. “Is it my debt? Or is it the government’s?”