‘Vile and ruinous’: debt swap sparks political clash

Government and opposition members accuse each other of destabilizing the economy

Yesterday, opposition coalition Juntos por el Cambio described a debt swap planned by the government as “vile and ruinous.” 

The swap, worth an estimated AR$7.5 trillion, is expected to be announced this week. Chief of staff Agustín Rossi said today that the opposition is trying to “destabilize” the government with its statements.

According to Ámbito Financiero, the government seeks to reprogram upcoming maturities to 2024 and 2025 with inflation-adjusted bonds, which will make up 80% of the total offer, and dual instruments, which will represent the remaining 20%. Today, members of the Economy cabinet plan to meet with banks, investment funds and insurance companies to fine-tune the deal, which will be announced this week.

Three main opposition economists —Luciano Laspina, Hernán Lacunza and Guido Sandleris— tweeted simultaneously on Sunday against the “dual bond” the government plans to offer as part of the swap. Dual bonds pay their creditor whichever is higher between the inflation rate and the peso depreciation against the US dollar.

Their statement also rejected a “put option” the government is allegedly planning to offer. According to Laspina, Lacunza and Sandleris, that would mean the debt could mature at any given time because a puttable bond means its owner has the right to demand early repayment of the principal.

“The gravest thing is the enormous risk that it generates to Argentines,” the joint tweet said. “Should the [put] option be pursued, that could activate a new inflation jump.”

A press release by Juntos por el Cambio stating that the government’s “maneuver” would bring “instability” followed the tweets. Last month, the coalition’s national board issued a statement calling the peso debt a “time bomb for the next administration” due to its size and rates, and deemed it “impossible to pay.” 

According to the government, the new debt swap seeks to placate the fears of a default after the February press release and opposition members subsequent statements suggested they might not pay the debt.

Today, Rossi tweeted that Juntos por el Cambio is trying to destabilize the government with “one press release a month”. 

“[These are] the same people that defaulted the pesos debt when they were in the government. The debt swap brings certainty and predictability to the Argentine economy,” he said.

The government coalition, Frente de Todos, also released a statement yesterday saying that former president Mauricio Macri’s government bankrupted the government through an “unpayable debt”.

“Now, they are spreading unease with any government’s decision or even before any possible determination of the economic cabinet.”


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