Corporate Treasury & FX in Argentina

Commentary

After Turkey and Egypt, this session discussed Argentina: have the shock devaluation and the rise in interest rates had the desired effect of making the currency more convertible, and starting the economy on the – slow and painful – road to recovery?

As in the other two cases, the response was one of guarded optimism. Business appears to be holding up, and the flow of currency out of the country has been improving. Also, as in the other cases, the exchange rate has stabilised. This does not mean there are no issues and everything is plain sailing: the Argentine consumer is going through a very difficult period. But one – Argentinian – participant said the pain is being accepted, at least for the time being. Inflation has started to come down: to put it in perspective, in September 2024, it had come down to an annualised rate of 209%, against 237% in August (source: BBVA). The central bank’s goal is 18%, and participants are budgeting for something between 30% and 50% next year,

Of course, this is Argentina, so nothing is simple:

• Foreign currency remittances have improved – for current imports, i.e, ones since December 2023.
• Many imports from before 2023 still cannot be settled. Various options exist:
  • BOPREAL bonds: these are three series of US dollar denominated bonds issued by the Argentine government, which will mature in October 2027 (series 1), June 2025 (series 2) and May 2026 (series 3). At maturity, the dollars can be remitted to settle import invoices, or, for series 2 and 3, dividends. These bonds can be sold in the secondary market, for a haircut which is usually about 30%. There has been talk of a new series specifically for old invoices.
  • Blue chip swaps: these involve using pesos to buy USD bonds, which can then be sold in dollars. The haircut on selling these varies: it has been as high as.....