Alberto Fernández will face a tough negotiation with the bondholders who rejected his offer presented in Olivos

Alberto Fernández and Martín Guzmán decided in the solitude of Olivos that the negotiation with the foreign bondholders should conclude in mid-May. A short and peremptory term in the face of the difference between the government’s offer and the desire of the funds that have an investment “buried” in Argentina close to 70 billion dollars. If the president does not open his hand a little and private creditors don’t lower their financial expectations, The result is easy to anticipate: there will be a default before May 25, 2020.

The basic difference between the debtor government and creditor bondholders can be established through a technical criterion that is easy to interpret. The Net Present Value (NPV for its acronym in English), is a method that allows calculating today, how much it is supposed to be worth in the future, the bonus that the funds will receive after negotiating with Argentina.

The government offer that the Securities Exchange Commission (SEC) will publish today establishes that the NPV foreseen by Guzmán for the bonds that he is trying to exchange will be of 38 cents for every dollar. Instead, investment funds that do their own financial calculations, they reply that the NPV of their sovereign securities should be set at 55 cents for every dollar.

38 cents for every bond Guzmán offers VS the 55 cents that Wall Street investors are seeking. That is the distance that exists between both trenches and that can lead to a new default for Argentina.

Endorsed by Alberto Fernández, the Minister of Economy foresaw in his offer a award or sweetener it could take the NPV to 42 cents on the dollar. A rise that on Wall Street is assumed as a gesture of goodwill, but that for large funds (BlackRock or Fidelity) tastes of nothing.

And with respect to the other variables of the proposal – interest and capital deduction, three-year moratorium, two or three bonds to exchange the current ones, or that the average maturity of the titles can reach 17 years-, are details that can be characterized as important and complementary.

So, the key to the negotiation is in the NPV: if Guzmán doesn’t stretch from 38 to 50 cents on the dollar, the bondholders are considering filing a default suit in New York courts.

When the different external debt crises occurred in Argentina, the same geopolitical event always occurred. Private creditors relied on the International Monetary Fund – which functioned as a multilateral auditor – at the White House and in a sector of the national political opposition. Raúl Alfonsín and Fernando de la Rúa suffered this logic of power that is usually designed on Wall Street and Washington, and then executed without mercy in Buenos Aires.

With the political presentation formalized yesterday in Olivos, and the explicit backing of managing director Kristalina Georgieva, Alberto Fernández has some leeway to deal with external creditors. However, it is a sui generis tandem (domestic agenda and multilateral organization) that only serves as temporary containment in the face of the offense by foreign bondholders.

Investment Funds are the real power of the United States and believe that a meeting in Olivos and two photos with Georgieva will serve to close the negotiation, is to repeat the historical mistake of having thought that Ronald Reagan would lean towards the military dictatorship when he fled forward carrying the flag of the Falkland Islands.

In fact, the IMF did not release yesterday the statement expected after the presentation of the President and his Minister of Economy, and none of the governors of Together for Change who participated in the conclave in Olivos, made statements in favor when the protocol ceremony concluded. . Horacio Rodríguez Larreta, Gerardo Morales and Rodolfo Suárez went down Villate street, greeted with a smile and left at full speed.

The pulseada begins on Monday. Alberto Fernández y Guzmán maintains that it is the best offer they could make, while the bondholders assure that it is little to satisfy their financial claims. The distance between Olivos and Wall Street is already almost infinite, and the time for negotiating little and at the mercy of the pandemic, which canceled trips to New York and private dinners in the rest of Manhattan.