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Argentina could issue $30bn in debt this year, as other issuers seek to mimic the government's success in returning to international capital markets with a blockbusterbond sale last month.
First out of the gates will be Argentina’s provincial governments, expected to issue at least $4bn this year. They hope to take advantage of rekindled investor interest in a country isolated from bond markets by a protracted creditor dispute, which was triggered by a 2001 default on almost $100bn of debt.
“Argentine debt represents an extraordinary opportunity. These yields don’t exist anywhere else in the world in countries with such low levels of debt,” said Facundo Gómez Minujín, managing director at JPMorgan’s Argentina unit.
Yields on Argentina’s $16.5bn debt issue, finalised on April 19, averaged 7.2 per cent. Meanwhile, government debt is 44 per cent of GDP, of which 17 per cent is debt with the private sector, according to officials.
“It may be a complicated moment globally but the search for yield will always continue to exist,” said Mr Gómez Minujín, who estimates that between the central and provincial governments and the corporate sector, Argentina could issue about $30bn in debt this year.
The provinces of Neuquén, Mendoza and Córdoba are expected to come to the market in the next month, with the city of Buenos Aires likely to follow shortly afterwards, according to finance secretary Luis Caputo.
The surge of debt issuance by Argentina’s provinces is explained by the government’s drive to lower inflation, currently about 34 per cent. Inflation is high partly because of the previous government’s willingness to finance provincial debt by printing money — a policy that the market-friendly government of President Mauricio Macri, who took office in December, wants to stop.
Mr Gómez Minujín also expects Argentine companies to issue about $4bn this year. Analysts name major companies such as Pampa Energia, Arcor and several local banks as interested in raising debt.
Walter Stoeppelwerth, head of research at Balanz Capital, an investment bank in Buenos Aires, said raising capital abroad was cheaper for Argentine companies than funding themselves in the domestic bond market, where they had to pay interest rates well over 30 per cent. “There’s also a lot of appetite for corporate debt on the buy side. You just can’t find the liquidity,” he added.
Government officials were nevertheless concerned that too many companies were adopting a wait-and-see approach, despite many projects in the pipeline, said Alejo Costa, chief economist at Puente, an investment bank in Buenos Aires. “This is a historic opportunity, but it looks like the majority are willing to wait until the economy starts to pick up,” he said.
The wisdom of buying Argentine debt
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