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26 de abril de 2016 | Notas | Bloomberg

Argentina No Darling in Local Bond Market Shunned by Foreigners

por Carolina Millan

• Local regulations have deterred overseas bond buyers
• Country sold $16.5 billion in international markets this month

Argentina attracted almost $70 billion in bids for its first international bond sale in 15 years last week, so there’s no denying its assets are in high demand. But to truly capitalize on this ravenous appetite from abroad, the country may have to revamp a local debt market that foreign investors have largely shunned.
While Latin American peers such as Mexico, Colombia and Peru have lured overseas buyers to their domestic debt markets — helping drive down their borrowing costs — Argentina has repelled them with years of regulations including currency controls. While the nation doesn’t track the level of foreign participation in its local bond market, Buenos Aires-based brokerage Puente estimates the amount is negligible. Argentina isn’t even included in JPMorgan Chase & Co.’s benchmark local-currency debt indexes.
The difficulty of investing in Argentina’s domestic-debt market is coming into greater focus as President Mauricio Macri seeks to lure more foreign money to revive South America’s second-biggest economy. On Dec. 17 — just one week after taking office — Macri jettisoned currency controls his predecessor put in place to prevent funds from leaving the country amid soaring inflation.
“Demand for local-currency products coming from foreign institutional clients has only grown since the elimination of FX controls in December,” Agustin Honig, managing director at boutique investment bank AdCap Securities, said from his office in Buenos Aires. “The next step for this interest to materialize in full would be for the government to facilitate the participation of these investors in the local market. That would be critical to improve the depth of the market for local-currency products going forward.”
Earlier this month, Argentina sold a record $16.5 billion of bonds overseas to pay for settlements, ending a decade-long legal battle with disgruntled creditors and pulling the country out of default.
Under new central bank President Federico Sturzenegger, Argentina in mid-December started allowing international clearing house Euroclear to trade the notes the monetary authority sells at weekly auctions. Still, foreign investors can’t convert local bond proceeds into dollars directly, forcing them to turn to an unofficial currency market, the blue-chip swap.
A Finance Ministry official didn’t immediately comment on whether there will be potential changes to regulations to make it easier for foreigners to invest in the local debt market.
Investor demand for the central bank’s bonds is rising as policy makers boost yields to as high as 38 percent to quell inflation.
“Demand on local bonds is going to be tied not just to a constructive view on the foreign exchange, which will depend on ongoing reforms, but also to the central bank’s monetary policy,” said Alejo Costa, head of strategy at Buenos Aires brokerage Puente.