The news was expected by investors and analysts as a deterioration in the condition could affect the country at a time when it is negotiating with creditors.
Finally, Argentina maintained the status of “Emerging market”, which will allow it to continue being considered as a destination for different investments, as reported by the company Morgan Stanley Capital International (MSCI).
The risk was given by the possibility of placing Argentina within the group of “border countries”, because it would have been outside the radar of most investment funds.
The decision of this market weighting brought relief to the Government, and also to the main players in the local market, although the world’s largest index provider warned that it could modify that consideration.
However, he warns that “he will consult about the possible reclassification of the MSCI Index of Argentina as part of its 2021 classification review “and what”if there is a further deterioration in market accessibility“, the country will be eliminated from the MSCI index as emerging.
In other words, if the stocks are strengthened against the dollar or capital restrictions and controls are increased, there are risks that it will enter the group of “border countries”
The news was expected by investors and analysts as a deterioration in the condition would affect the country’s financial front just at a time when it is negotiating with creditors.
Sebastien Lieblich, chairman of the MSCI Stock Index Committee, argued that “the imposition of current capital controls is not in line with the market accessibility criteria of the MSCI Emerging Market Indices.”
Minister Guzmán noted that COVID19 affects the logistics of the swap
And that’s why “the Argentine authorities must realize that prolonged application of capital controls or the introduction of more controls may force the reclassification of the MSCI Argentina index from the emerging market status to the independent or frontier market. ”
“While volatility increased dramatically due to the Covid-19 pandemic, global equity markets remained accessible and continued to perform well, allowing issuers to raise capital and investors to manage risk during the crisis,” said Dimitris Melas, global director of Equity Research and chair of the Policy Committee of the MSCI Index.
Better understanding with bondholders
The Minister of Economy, Martín Guzmán, promised to keep under control the fiscal deficit that the government is rapidly incubating and confirmed that the obstacles to debt restructuring have to do with legal terms that investors are not willing to accept in the new bonds to be issued.
The official participated in a webinar organized by the Americas Society / Council of the Americas and presented by Susan Segal, where he reviewed the challenges facing the Argentine economy amid the pandemic of the COVID19 and how debt restructuring is taking place.
“The deficit is growing and this year we are in a very difficult situation. For now, we are restructuring the debt. But there will be measures to bring it under control while we can help those who are ill due to the global pandemic. COVID19“said the minister, in an exhibition.
The minister said the BlackRock-led group is the toughest against the country.
At the same time, he pointed out that before the pandemic the country had a fiscal path where from 2023 the accounts would stabilize, and that despite the fact that this year’s numbers will be quite different – obviously due to more deficits – it maintains the idea of achieving fiscal consolidation.
Regarding debt, the Economy Minister He pointed out that reaching an agreement will be important, precisely, to have a tolerable debt threshold that is consistent with a fiscal number according to what Argentina can hold. “Doing this well means that you have to have the support of society and the international community. COVID it affects the logistics of the swap because it is not face to face, “he said.
On the other hand, Guzmán gave the group Ad hoc where is it BlackRock he is the hardest and affirmed that “they do not do their part”. “Hopefully we have a good agreement. But part of the lack of agreements has to do with the legal terms. The creditors want there to be another treatment and that would make progress in recent years futile. We cannot do that,” he stated in the talk with the Council of the Americas.
What is discussed is the legal aspect of the transaction. Something not less since the country wants to change – obviously for the worse – the conditions for the bondholders. Argentina proposes to maintain the conditions -indenture- of 2005 for holders of the Discount and Par bonds, but now the largest committee led by BlackRock requires that all new bonds be issued with Indenture 2005, eliminating the one in 2016.
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