Repo, 5G and energy: Massa speeds up his plan to get dollars

Economy Minister to announce repo credit of around US$1 billion as sovereign fund negotiations continue

Economy Minister Sergio Massa is speeding up his plan to build a base of dollars that would enable him to confirm his goal of “stabilization”. In the coming days he will announce a repo loan that is said to be around US$1 billion, with a rate below 10%. Meanwhile, ENACOM will speed up a key tender that could add US$1.5 billion.

Last Friday, the head of the Economy area and the Secretary of Energy, Flavia Royón, confirmed that a series of negotiations will result in savings of about US$2.1 billion with respect to energy import expectations. Also, negotiations are ongoing with sovereign funds interested in investing in infrastructure. 

These days, the currency exchange scenario is taking a lot of man hours for the economic team. Not just to meet the ambitious US$4 billion reserve accumulation goal that was agreed with the International Monetary Fund for this year, but mostly because it’s a fundamental condition to navigate the path of “stability” the government seeks. Also, obtaining more foreign currency is the only way to reach the “third consecutive year” of economic recovery. 

In this scenario, Massa will announce in the coming days a repo loan of more than US$ 1 billion by international banks, with bonds as collateral. According to official sources, “the rate will be below 10%”. While these kinds of tools are commonly used for short-term financing, the scope of the credit line is still unknown.  

“We’ll have more progress this week,” sources at the treasury said about when this initiative will be formalized. The market is speculating that some of these currencies may be used to accelerate the debt buyback. According to one of the participants of a dinner on Monday with President Alberto Fernández and mayors from Buenos Aires province at the Olivos presidential residence, Massa anticipated that “he is going to initiate a large process of debt reduction for Argentina.”

In that same scenario, the Economy Minister explained that he will also focus efforts on “stabilizing financial dollars” because “they play an important role in increasing prices.” He added that “the fight against inflation is key for income recovery” and recognized that “the excess of pesos in 2020, 2021 and 2022, threatens definitive stabilization.”

Apart from the repo, the government has been negotiating extra financing with an important sovereign investment fund that has plans for a series of infrastructure projects to boost strategic sectors. They expect to move forward and get disbursements during this year.

Key tender

In the challenging currency exchange situation, everything helps. Therefore, the matter of obtaining foreign currency goes beyond the staff of the Economy Ministry. Further relief may come from the National Communications Entity (ENACOM), which has been speeding up the tender for the spectrum compatible with 5G technology. These are “three blocks of 100 MHz in the medium band”, according to sources familiar with the process.

This could add close to US$1.5 in the first stage of the agreement, according to official estimates. Massa’s people believe that the funds will arrive in the first semester. The geopolitical dispute between the United States and China is expected to be settled with an intermediate result, which would allow the operation of both Wi Fi 6 and the technology promoted by the Asian firm Huawei.

Energy saving

Last Friday, in a conference Massa held with Royón, he announced that thanks to a series of negotiations and the variations in international prices, Argentina will save around US$2.1 billion in energy imports compared with the figures included in the budget. 

The Government issued a statement explaining that “for 2023, the expenses originally budgeted for LNG imports were US$3.46 billion, at a value of US$55 per million BTUs. However, the volatility of the international LNG price opened a window of opportunity”. Therefore, a decision was made to bring the purchase forward: “This allowed us to lower the price to US$20.8 per million BTU through a bidding process where nine international companies participated,” read the statement.

Sources in the Economy Ministry point out that the initiative will also create “fiscal savings of more than AR$500 billion” and the Néstor Kirchner gas pipeline will bring additional relief in July.

Originally published in / Translated by Agustín Mango


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