Taking on US dollar denominated debt in Argentina can always lead to big risks, especially when the peso is strong and the market looks happy to lend. But both the Argentine state and Argentine companies have continued to do this historically, and just like the nation ended up defaulting on some of its debt last year, some firms are now looking at risk of following suit.
The graph above shows the market value of corporate bonds from three publicly-traded Argentine companies: state-controlled hydrocarbons producer YPF, Pampa Energía and Banco Macro. After bouncing with the debt agreement reached by Economy Minister Martín Guzmán for Argentina’s public debt, the latest Central Bank restrictions to access the official currency market made prices plunge again, because investors fear private defaults are now likely.
Argentina’s official exchange rate is being de facto subsidized by the Central Bank through daily sales in the country’s FX market, and those who can’t get access to it need to utilize alternative rates which can be twice more expensive. Central Bank chief Miguel Pesce has been thinking about negotiating with companies for them to launch a debt renegotiating program similar to the one led by Guzmán at a national level, in order to ease the pressure on his coffers.