Argentina’s President Milei to issue a dollar bond, eyeing a return to global markets
By ISABEL DEBRE and ALMUDENA CALATRAVA
BUENOS AIRES, Argentina (AP) — The libertarian government of Argentine President Javier Milei said Friday it will issue a dollar bond for the first time in nearly eight years, as the cash-strapped country seeks to return to international markets and faces a huge debt to pay in the coming months.
The dollar-denominated sovereign bond, issued under Argentine law and aimed at foreign and local investors, has an interest rate, or coupon, of 6.5% and matures in November 2029, the Economy Ministry said, without giving details on the size of the offering.
Analysts say the bond auctions signal growing confidence in President Milei’s reforms after his party’s landslide victory in midterm elections reassured bondholders of his government’s ability to repay them.
“This shows that they are taking steps – slowly – to normalize the market and reduce their dependence on international reserves, which is a big concern,” said Fernando Marull, an Argentine economist.
“Ideally, the debt should be paid by refinancing, not by scarce reserves. It’s like going to a bank and refinancing your loan instead of paying everything with cash out of your pocket. That’s why it’s so important.”
Economy Minister Luis Capto said the money would be crucial to settle part of the $4.2 billion debt that matures on Jan. 9 without dipping into reserves. Because the bond will not be issued under foreign law, he said, it will not need Congressional approval.
“Reopening foreign currency debt markets will expand Treasury’s options regarding instruments available for debt management,” Caputo wrote on social media, attributing the move to Milei’s success in bringing the budget deficit under control and lifting most of the capital controls that locked down its debt markets.
Regaining access to international borrowing markets has been one of Milei’s goals since the radical libertarian economist took office in late 2023 with the aim of reducing severe inflation, stabilizing Argentina’s struggling economy and reversing years of heavy public spending under left-wing populist governments.
Chronic economic crises have led Argentina to default on its debt nine times, most recently during a restructuring in 2020. As a result, high borrowing costs and legal struggles with restive foreign investors have kept the country from taking on debt abroad for most of the past two decades.
Without recourse to global capital markets – which is how many governments around the world borrow or roll over their debts – Argentina will struggle to grow its economy and repay the more than $40 billion it owes to the International Monetary Fund.
Earlier this year, Caputo secured a new $20 billion loan from the IMF to help Milei continue its tax reforms. To release successive tranches of funds, Milei’s government has pledged to increase its net hard currency reserves to around $5 billion by the end of the year.
IMF spokeswoman Julie Kozack told reporters Thursday that “meeting the year-end reserve target will be a challenge” for Argentina. Warning that Milei’s current exchange rate policy aimed at supporting the peso was slowing reserve accumulation, she added:
“We continue to advocate for authorities to take advantage of the window of opportunity to implement a coherent and robust monetary and exchange rate framework to help support reserve accumulation. »
Milei has diverted billions of dollars from the central bank’s coffers to reinforce the depreciation of the Argentine peso in recent months.
This strategy was taken to the extreme in the run-up to the midterm elections, as doubts about the trajectory of Milei’s harsh austerity plan sparked a run on the peso. As the peso’s official rate collapsed against the dollar, US President Donald Trump stepped in to save his ideological ally with a $20 billion credit line and outright purchases of pesos.
Even though the election victory excited markets and vindicated Trump, the worry remains: Nothing can stop Milei from spending his foreign exchange reserves again if he depends on a strong peso to fight inflation – not even this bond auction, which experts say is less attractive to foreign investors because it is issued under local law.
“I don’t think this represents a return to international markets,” said Juan Battaglia, chief economist at Cucchiara, a Buenos Aires brokerage.
“The government has made significant progress in normalizing the financial account, but there is still a long way to go. »
