The Buenos Aires government of Axel Kicillof will pay a debt of US$ 347 million next Monday. To obtain the foreign currency, the province was doing Repeated purchases in the official exchange market (MULC), another factor that contributed to narrowing the Central Bank’s margin for obtaining dollars.
The payment due by the Buenos Aires administration includes services for 332.7 million dollars and 14.9 million euros, between amortization and interest. “The payment is due on Monday, but since there is a holiday in the United States Bondholders are credited on Tuesday“, they confirmed in the province.
The payments correspond to the US$ 7,148 million debt that was restructured in 2021 to get out of default. From that operation arose Four bonds (two in dollars and two in euros) with interest coupons in March and September of each year until 2037, and increasing rates of 6.375% and 5.50% in 2024.
Kicillof had already made a similar payment in March. What caught the attention of the market now is that Until the end of June, it had its own deposits to do so. According to BCRA data, the amount was US$300 million. The truth is that Banco Provincia was buying the foreign currency to transfer the payments to the US Bank.
“The BCRA requires you to do it in purchases for that reason “It had to be done in several installments,” Sources close to the governor said. The government says that “the provinces, when they have due dates, can access the MULC to buy dollars” and, in that case, “the BCRA has less opportunity to buy reserves.”
It is said in the market that on Wednesday it was able to buy US$ 154 million (the largest acquisition in three months) because an oil company sold dollars from an “argendollar” loan. But This Thursday it was no longer able to add foreign currency and registered a new fall in its reserves, which remain in negative territory.
In August, the monetary authority accumulated US$ 619 million in net purchases, the first positive balance after two negative months. A good figure that is not enough to clear up doubts: from Monday, a greater demand from importers is expected due to the reduction of the PAIS tax, and then due to the debt of the provinces.
Dollars in exchange for adjustment?
By the end of the year, to meet their debts, the governors need US$ 440 million, and another US$ 1,354 million in the first half of 2025, according to Aurum, Pablo Repetto’s consultancy. “Most of it is paid to foreign holders or via wire transfer and then it leaves the BCRA and net and gross reserves decrease,” explained the economist.
This year’s maturities include: Jujuy (US$ 26 million), Mendoza (US$ 58 million), Black River (US$ 45 million), Chubut (US$ 28 million), Córdoba (US$ 144 million), Neuquen (US$ 53 million), Land of Fire (US$ 5 million), Santa Fe (US$ 9 million), City of Buenos Aires (US$ 33 million) and Salta (US$ 39 million).
The case of La Rioja is more delicate. Ricardo Quintela’s government announced that it would not pay the bonds due last Monday, thereby deepening the default in which it has been since February. And Argentina, on the other hand, must face payments to bondholders for US$ 4.9 billion in January.
The anger over dollars has as a backdrop the fight between Milei and the governors over the adjustment to the provinces. The reduction in transfers and subsidies allows the government to maintain a fiscal surplus to buy dollars and pay debt. This is a strategy that most provinces ended up adopting.
“In terms of availability of funds, the provinces applied a very strong adjustment to spending in all its components, which gave some breathing room to the fiscal result and opened the possibility of facing the corresponding payments,” said Alejandro Pegoraro, director of the consultancy firm Politikon Chaco.
The exception was Chaco, which paid in February with an advance from revenue sharing and in August with a loan from Banco Nación, while Buenos Aires resorted to a mix of fiscal income, reduced spending and borrowing in pesos after Milei’s administration was authorized in July.
“Surely, a part was tax increasealthough the collection is on the decline (-5.2% accumulated to June); another part with short-term financing (it is seen that Treasury Bills are placed every month) and another part from the ‘savings’ produced by the adjustment of public spending,” said Pegoraro.