ARGENTINA: THE DOLLAR CRISIS ARRIVES. Woe to borrowing in foreign currency
Argentina is heading towards yet another currency crisis. The country is in the midst of a devastating economic crisis, which crosses the traditional problems of a currency that is hooked and unhooked to the dollar, with alternating cycles of revaluation and devaluation, with the world crisis caused by Covid-19
The latest news concerns the large local company YPF, the national company that manages the country's large oil and hydrocarbon stocks. The company has a dollar bond that is falling due in March, but the Argentine Central Bank has, so far, refused to buy the dollars necessary for its full repayment on the international market.
The reason is simple: the peso has significantly devalued during 2020 and this would make the purchase expensive, as well as give a further push to the downside of the Argentine currency:
The problem is always the same: when you get into debt in a foreign currency you can have enormous problems in repayment, even in the presence of good profitability and capital availability because you are exposed to the international exchange market. Of course, the YPF bonds, with various maturities (there are also in 2047).
By refusing to refinance YPF dollar debt, the central bank is giving a strong signal to restructure the nationally owned company's debt, which effectively needs to rearrange its financial position. however, this operation casts a shadow on the debt and shares of many Argentine companies and by extension, emerging countries, just at a time when the indices linked to these countries were at their highest.
The excess liquidity also spilled into investments in countries that, indebted in foreign currency, would have needed a little more caution.
A lesson also for Italy and for the government's desire to borrow in foreign currency, the euro, towards an external power, the commission.
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The article ARGENTINA: THE DOLLAR CRISIS IS COMING. Woe to borrowing in foreign currency comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/argentina-arriva-la-crisi-del-dollaro-guai-ad-indebitarsi-in-moneta-estera/ on Fri, 22 Jan 2021 07:50:20 +0000.