Country Background Argentina. Investor-Country Conference Cairo, Egypt March 26-27, 2010

Transcription

1 Country Background Argentina Investor-Country Conference Cairo, Egypt March 26-27, 2010

2 Macro Economic data 20% 15% 10% 5% 0% -5% -10% Gross Domestic Product Constant 1993 AR$ millions - seasonally adjusted 380, , , , , , ,000 After the collapse of the convertibility regime, economic activity showed a remarkable recovery over the six-year period between 2003 and 2008, growing at an average rate of 8.4% and accumulating a rise of 65.9% over the minimum in % 240,000-20% 220,000 IQ 94 IQ 95 IQ 96 IQ 97 IQ 98 IQ 99 IQ 00 IQ 01 IQ 02 IQ 03 IQ 04 IQ 05 IQ 06 IQ 07 IQ 08 IQ 09 Y.o.Y. change (left axis) GDP $93 (right axis) The national public sector primary surplus, grew up after the 2002 crises. When recovery finished it stabilized on 3%. Even in the middle of 2008 international crises, this value remained positive, and on similar values. The same thing happened with the public overall balance. 2

3 Macro Economic data The sustained growth brought a recomposition of the international reserves, that showed a strong upward slope until the beginning of 2008 (maximum). Feb-10 Since 2001, current account turned positive. The administered float Exchange rate policy sustained the economy's competitiveness.

4 Debt Market Snapshot Indicators (*) 2006 (*) 2007 (*) 2008 (*) 2009 (*) As % Of GDP Sovereign Debt 166,4% 138,7% 127,3% 73,9% 64,0% 56,1% 48,8% 49,8% E External Debt 95,3% 79,2% 74,3% 34,8% 26,3% 24,1% 18,6% 19,3% E Total Services (**) (**) (**) 11,9% 10,5% 10,2% 8,1% 10,1% E Debt average life 6,1 6,9 7,8 12,3 12,9 12,6 11,7 11,1 As % of International Reserves As % of Exports Debt in foreign currency 1154,8% 959,6% 736,2% 236,8% 222,2% 165,4% 165,3% 165,8% External Debt 836,2% 722,5% 568,2% 217,0% 175,6% 134,6% 120,2% 118,7% E Debt in foreign currency 415,1% 393,4% 362,8% 141,4% 130,4% 115,1% 93,4% 117,6% External Debt 300,6% 296,2% 280,0% 129,6% 103,1% 93,7% 67,9% 84,2% E As % of Tax Revenues Interest paid (**) (**) (**) 8,5% 7,6% 8,1% 6,6% 8,0% Total Services (**) (**) (**) 52,2% 44,9% 40,8% 31,1% 37,0% (*) Excluding untendered holdings of 2005 Debt Exchange. (**) Restructuring process. Source: Argentine Ministry of Economy and Public Finances Debt ratios place Argentina in a solid solvency position compared with other LATAM countries. Debt services represent 37% of total tax revenues and FX debt services represent only 53% of FX-linked tax revenues. 4

5 Sovereign Debt Structure By Type of instrument Total Outstanding Debt as of December 31, 2009 (1)(2) U$S billion By Currency By Service Profile Commercial Banks / Others 4% Bilateral Loans 5% Short-term debt 10% Bonds 67% Others Euro 2% 10% ARG$ % % 25% Multilateral Loans 11% Guaranteed Loans 3% (1) It does not include untendered holdings of 2005 Debt Exchange. (2) Debt denominated in currencies other than US dollars has been converted into that currency using the exchange rates as of December 31, 2009 (ARG$/U$S=3.80). U$S 42% Source: Argentine Ministry of Economy and Public Finances. Debt structure presents comfortable conditions, in terms of maturity, currency and type of creditor. The average maturity is over 11 years. CER-adjusted ARG$ 25% Only 35% of total debt is held by private creditors, representing only 17% of GDP. Almost 50% of total debt is denominated in local currency % %

6 Financial Road Map Take the necessary steps to advance in normalizing non-performing debt (Holdouts, Paris Club and other creditors). Deepen measures aimed at improving reputation and consolidating conditions in order to return to international financial markets. Advance in converging to a sovereign funding structure with a bigger share of market sources compared to public sector agencies. Develop the local Debt Market launching a regular ARS securities Program Goals Improve reputation and consolidate conditions to regain access to international financial markets. Normalize the financial situation Consolidate debt sustainability conditions Balance the funding structure

7 Local Debt Program Bi-weekly T-Bills and notes auctions in local currency, using fixed and floating (BADLAR) rate. Complement the Central Bank experience constructing a local yield curve Efforts will be concentrated in developing a 1 to 3 years fixed curve and liquid benchmarks. Generate an optimal distribution on payments and increase the liquidity of public debt on capital markets. We believe the infrastructure and incentives are set to attract Local and International Investors. Further developing the local yield curve will allow Argentina to participate in the GEMX index

8 Investability Criteria Argentine non defaulted debt (B-) exceed the investability criteria (based in capital controls and taxation, liquidity, efficiency, and regulations markets and infrastructure). Argentina scored 51% weighting the six categories. Government is working in the relevant themes to improve the qualification, aiming at widening the investor base. On one of the primary concerns, capital control, the finance department is evaluating pros and cons of alternatives to the then introduced unremunerated reserve requirement such as a capital inflow tax. The decision will consider theoretical impact on liquidity, market confidence and short term foreign capital movements. Simultaneously, government is working on improving access to securities, money and derivative markets.

9 Market depth Four types of securities are traded on local markets: Treasury USD, ARS floating and inflation-linked Bonds Central Bank fixed (Lebac) and Floating (Nobac) T-Bill and Notes Before the crisis, monthly volume peaked USD 18 BN. Nowadays the average USD is 5 BN. 10 from 13 local currency bonds exceed USD 100 millions of outstanding amount, all with maturity longer than 18 months. Million of USD Amount outstanding of total debt Nobacs Lebacs Bonos en Dólares Bonos en Pesos As part of his liability management initiatives, on the Treasury began to issue Floating ARS bonds totalizing USD 2,2 BN, with maturities longer than 3 years Ene Jun Nov Abr Sep Feb Jul Dic May Oct- 09

10 Market Liquidity Millions de USD Annual Repos volume This helped to develop a liquid Central Bank Fixed Yield curve with maturity up to 600 days January and february % 16% 14% 12% 10% 8% The Repo market, long recognized as a pillar of market liquidity, reach USD 450 BN volume on 2009, and show a consistent up-trend. Lebacs - Secondary market Based on the 4 criteria for liquidity and efficiency, Argentina has a good performance. The turnover ratio is growing up after the crises, and the Bid Ask spread are tight for the most traded bonds.

11 Consistent carry between ARS and USD Looking at the Central Bank yields and the USD exchange rate annual rolling change, except for the 6 months following the crisis, the carry was positive for ARS position. Tasa de emision primaria (LEBACS e/270 y 365 dias) Variacion interanual dólar 30% 25% 20% 15% 10% 5% 0% -5% Fluctuations of peso/dolar and Lebacs (from 270 to 365 days) Lebacs Variacion Dolar % Badlar and CB rates % 01-Ago Feb Sep Mar Oct Abr Nov Jun Dic Jul Ene Badlar Rate (private banks) Repo rate (1 day) After the crises, the Badlar rate stabilized and converged to the Central Bank policy rate Oct Abr Nov Jun Dic Jul Ene Ago-10

12 Hedge Markets Badlar swap curves show an harmonious performance. Going from 9,49% to 16,3% in 2 years. % Badlar swap curve % NDF and Dollar Future implicit Rate 6 Mar-10 Jun-10 Sep-10 Dic-10 Mar-11 Jun-11 Sep-11 11% 10% 9% 8% 7% 6% 5% Rofex NDF Off shore (NDF) and On shore (Rofex) curve are very similar, on lower levels than past times, consistent with the actual monetary policy. 4% Maturity days

13 Concluding Remarks Argentine local currency debt market has enough depth and liquidity to attract local and international investors. It has a developed repo market and is improving the derivatives markets that allow investors to hedge risk without disrupting liquidity, There are a wide distribution of maturities on time, although more securities are either floating or inflation-linked, the next step is to consolidated the Treasury fixed local securities. Capital controls were designed in view of macroprudential risk and not in view of affecting the local market investor base. Improvement will be considered, to reconcile both objectives. At present, the government is working on new measures to improve the capital market, with the idea of leaving the local and international crises in the past, returning to the markets with a new and consolidated issue program. 13

14 References Secretary of Finance Ministry of Economy and Public Finance Republic of Argentina Central Bank Local Market securities price information