Argentina’s Central Bank closed the second auction of a bond designed for importers to pay for their debt in US dollars on Thursday, again with meager results. Out of the total US$750 million, it only received offers for US$57 million — 7.6%, even less than the first auction made last week.

That first bid of the Bonds for the Rebuilding of a Free Argentina (Bopreal, by its Spanish acronym) ended with a purchased amount of US$68 million (9% of the total offered amount).

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 order to avoid a halt in economic activity, Fernández’s government allowed importers to purchase goods and services on credit, with the promise that they would be provided the currency to cancel these payments. The debt companies incurred with their providers — which in some cases are their parent companies — ballooned to more than US$30 billion.

Under President Javier Milei’s administration, the Central Bank created the Bopreal, a bond that can be bought only by companies that had acquired debt with their providers up until December 12. It is subscribed in pesos and the returns are 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 bonds and shrink demand for foreign currency as much as possible in the short term. 

The Central Bank announced it will hold weekly Bopreal bids until the end of January, or when the maximum amount for the first series of the bond — US$5 billion — is reached. The second and third series will be offered in February.

The first series of the Bopreal has 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.

The Bopreal bonds are not without critics. Some analysts deem the move as a way of nationalizing private debt at the official dollar rate, noting that some of that debt is with the importers’ parent companies. In an interview with the Con Vos radio station on Friday, former Economy Minister Martín Guzmán said that these bonds mark the beginning of a dollarization process.

The Argentine Confederation of Medium-Sized Companies (CAME), which groups some of the companies that have that kind of debt, is following the Bopreal bids closely. “They are still not attractive,” José Lopetegui, CAME’s head of international trade, told the Herald. He said that some companies covered themselves by obtaining US dollars in the blue-chip swap market and that some restrictions are still in force for them.

According to the Lopetegui, there still needs to be a relevant secondary market for such bonds. “Since there are no dollars, it is not possible to pay abroad. These bonds are to pay debts that we have owed for six or eight months,” he said. “You cannot give a bond to suppliers, they will not want it. You have to sell them [here in Argentina]. Is anyone going to invest to buy such a bond?”

A report published on Friday by consulting firm Ecolatina agreed, saying that importers adopted a “wait and see” posture, waiting for the bonds to be exchanged in the secondary market. 

“In its first day of trading, the implied blue-chip swap rate for importers was in the AR$1,300 area,” the report said. “If they manage to maintain their parities, the [Bopreal] may become attractive if the financial U.S. dollar rates exceed this threshold.”