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ECONOMY | 12-01-2024 09:52

Argentina’s importers buy bonds in turnaround for Milei

Argentina importers snapped up bonds aimed at helping them pay down debts owed to suppliers abroad in a win for the government.

Argentina importers snapped up bonds aimed at helping them pay down debts owed to suppliers abroad in a win for President Javier Milei after two previous auctions of the notes flopped.

The Argentine Central Bank sold US$1.18 billion of the securities in an auction that concluded Thursday, according to a statement. Buyers rushed in after the government sweetened the terms, leading the bank to upsize the sale from the US$750 million it had planned to sell.

It was a sharp reversal after the inaugural auction on December 28 saw the government sell just US$68 million of the US$750 million offered. A second attempt saw even fewer sales.

The turnaround in results — which Bloomberg reported earlier Thursday — came after Milei’s administration changed a norm in how importers could use the proceeds of the bonds. They are now allowed to transfer the dollars they raise from selling the notes on the secondary market directly to their foreign suppliers, according to a statement on the bank’s website. The payments weren’t allowed under previous rules. 

The securities are key to helping importers settle some US$30 billion owed to suppliers and improving the central bank’s balance sheet. The sales are also meant to help Milei wrestle a chronic dollar shortage and strict capital controls, both of which have bottlenecked trade. 

The dollar-denominated importer notes are called “Bopreal” — which stands for “bonds for the reconstruction of a free Argentina” — and offer a five-percent annual interest rate with a 2027 maturity. They can be bought in local currency, which in turn would help the central bank absorb some pesos in the economy in a bid to ease inflation already running at 211 percent a year, the highest in Latin America. 

The auction capped a series of wins for the Milei government this week, including the market’s approval of an agreement with the International Monetary Fund and a better outlook for crops in the second quarter.

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by Ignacio Olivera Doll & Kevin Simauchi, Bloomberg

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