Argentina’s Central Bank Sees US$4.4 Billion Dollar Cushion Ahead

Argentina’s Central Bank is counting on a US$4.4 billion flow of dollars from companies and provinces to provide a new cushion for the exchange rate before the end of the year. The money comes from debt placements made between January and August that have not yet been liquidated in the market.

Speaking at the 47th annual convention of the Argentine Institute of Finance Executives, Central Bank Vice President Vladimir Werning said the country’s external position was stronger than financial-market projections suggested. He said gross reserves had risen by nearly US$30 billion since December 2023, despite more than US$40 billion in debt payments and the easing of foreign-exchange restrictions.

The Central Bank’s plan for the coming months rests on three elements: private-sector dollar supply, a fiscal anchor and liquidity tools. The economic team expects the remaining corporate debt proceeds to enter the market gradually. The bank would then seek to absorb the excess liquidity through fine-tuning of the monetary base.

Companies and provinces have raised an average of US$1.67 billion a month in hard-currency financing since the start of the year. The pace slowed sharply in August, however, as country risk exceeded 500 basis points. Corporate and provincial hard-dollar debt placements totaled US$937 million, less than half July’s figure, according to Aldazábal chief economist Mariano Ortiz Villafañe. He attributed the decline to higher U.S. interest rates and Argentina’s wider sovereign spread.

Foreign-exchange rules require the proceeds to be liquidated in the market, although issuers do not have to do so immediately. That creates a lag between a debt issue and the arrival of its dollars in the foreign-exchange market. Market participants also expect corporate and provincial issuance to revive late in the year if country risk compresses further. San Juan is preparing an international bond of up to US$600 million, while YPF has offered to repurchase up to US$500 million of two outstanding international bonds. Energy company Tecpetrol has begun a roadshow for a new international bond.

Ortiz Villafañe cautioned that these transactions do not guarantee calm in the foreign-exchange market. He said they nevertheless support a scenario of a stable dollar through year-end.

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The placements of hard-dollar debt by corporates and provinces totaled US$937 million, less than half the July amount.