Daniel Marx, the former official who led the most debt restructuring for the country, spoke of everything. Guzmán’s strategy, mistakes, and as follows
If there is an economist who knows more deeply, and in first person, the ups and downs of debt negotiations, that is Daniel Marx. He has been a privileged actor since the trenches since, at least, the late 1980s: Director of the central bank of the Argentine Republic during the presidency of Raúl Alfonsín between 1987 and 1988, and Special Financial Representative and Chief Negotiator of the Argentine external debt from 1989 to 1993. In addition, he was Secretary of Finance of the Ministry of Economy of the Argentine Republic during 1999 and 2001, when he came out facing Domingo Cavallo.
Now, with debt restructuring on bogged ground, the current CEO of Quantum Finance gave his impressions of how the process can continue. “The call for attention is that time plays against both parties. It’s not free. The first thought would be that we do a cost-benefit account right, because many of the choices we make today have consequences“Marx expressed during the 9th Capital Market and Corporate Finance Symposium organized by the Argentine Institute of Finance Executives (IAEF).
“These delays have a substantial cost on the economy. This involved an amount of money that has been used, no minor side effects, among them came a trickle of dollar deposits, exchange rate pressures, and the expected non-liquidation of exports and a decrease in commercial lines, “said the director of Quantum.
Marx believes that the government’s intentions are good but that there have been mistakes.
The numbers won’t help
Going directly to the negotiation that the country is currently facing, Marx – who was part of the fleeting Debt Advisory Council asked for Martín Guzmán– He affirmed that if there is a critical mass of the bondholders who accept the swap, it will drag the rest, for incentives or for the will to adhere, but that it seems that this will not be the case.
“I think it is on the verge of obtaining 40% adherence, it will be stronger in some species and it will be seen if the rest can be moved because it is also assumed that some will not want to go to litigation as a more efficient way to collect. We will see how the game is elucidated, “predicted the specialist.
In terms of strategy, Marx related what the process should be like. First, obtaining majorities necessary to reach agreements, once they have accepted these, the task is easy for the rest and obtaining the majority for collective action clauses. “Normally when you launch a swap offer you have high adherence, even the 2005 swap was more than 75% accepted. Many times when launching a failed swap it is not a good precedent for moving forward,” stresses the former debt negotiator.
And he affirms that although there are different mechanisms and ways of finding majorities, such as putting clauses in place, and there is a degree of flexibility in making the calculations, “now the decision that the Government would be taking is based on taking certain risks.” Marx remarks that from what is read between the lines, there is an agreement with a group of creditors that does not guarantee the adherence of the greats.
“Nor with the three groups mentioned is such a high number guaranteed, so you always have to look for the rest, but some of them can block a swap,” he warned.
The Fund has not yet begun to negotiate a plan with the country and that is why it is so comfortable.
Next step, the Fund
“The government’s intention is good, I certainly believe that there were some issues of probability calculations that did not occur, “noted, elegantly, Marx not to load the ink on the mistakes that led the first steps of the economic team both foreign bondholders and local debt treatment. “It is not only the debt settlement but one that makes sense of everything else,” he said.
On the other hand, Marx remarked that the great creditor, the IMF, he’s in a relatively comfortable position, because “he hasn’t put his money on the line.” Something that is required to close the national financial program and to unlock other accesses, such as World Bank, IDB or Paris Club programs. Or long-term financing on favorable terms.
“Argentina comes from a prolonged recession and recurring episodes of capital outflows, with a very problematic trajectory for a long time. Debt negotiation should achieve a more comprehensive change and change history. Of course, the effects of the pandemic are added to these effects. In Argentina we had already been overdrawn since before. The Argentine risk was so high that the demand for Argentine assets was very low. The objective is debt settlement in an economic context that makes sense of it, “said Marx at the end of the first day of the virtual congress organized by the IAEF.
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