Argentina authorizes Treasury to seek $5 billion in international debt

Argentina's government, under President Javier Milei, has officially authorized the national Treasury to secure up to $5 billion in international financing. This decision, published in the Official Gazette via a presidential decree, allows the Treasury to obtain dollar-denominated loans from international financial institutions. These operations will be supported by partial guarantees from multilateral organizations, a move the government states is intended to lower national financing costs.

The decree does not specify the names of the financial entities involved but clarifies that the loans will be structured with backing from multilateral credit organizations. Recent developments include the World Bank and the Multilateral Investment Guarantee Agency approving a $2 billion guarantee package for Argentina, and the Inter-American Development Bank granting a $550 million guarantee. These guarantees are crucial as Argentina faces substantial dollar debt maturities in the current and upcoming years.

The country has been hesitant to re-enter international debt markets due to high interest rates, reflecting its high credit risk and a country risk index currently at 421 basis points. Financial firm Portfolio Personal Inversiones (PPI) suggests the decree might be paving the way for structured funding operations, possibly 'repo' agreements or bilateral schemes with international banks, rather than traditional open market bond issuances. Last year, Argentina raised $2 billion through a 'repo' operation using bonds issued under Argentine law, but this time, bonds may be issued under New York law, according to the decree's implications.

Argentina's immediate financial challenge is a $4.35 billion principal payment on Global and Bonares bonds due on July 9, with approximately $3.8 billion held by private creditors. This authorization for new financing is seen as a necessary step to manage these upcoming obligations.