Some NeuGroup members are using Argentina’s Bopreal bonds to free nearly all of their trapped cash amid peso devaluation.
During continued devaluation of the Argentine peso that may only get worse, multiple NeuGroup members are prioritizing the use of the Bopreal series of bonds launched last December to help importers pay off cross-border debt to get trapped cash out of the country as soon as possible.
- Members discussed their use of these bonds in a recent session of NeuGroup for Latin America Treasury featuring experts from Banco Comafi. One member said their view is that devaluation will continue to worsen, and said their company would be “exposed like sitting ducks” if they weren’t able to get the cash out of the country as soon as possible.
- Comafi’s Mateo Gall said futures markets are pricing in devaluation rates around 10% by this July amid economic, political and social challenges in Argentina. However, recent positive outcomes like increased dollar deposits in the country have led to a reduced likelihood of an official devaluation like the one that occurred last December.
- Bopreals have been released in weekly auctions by the Argentine central bank (BCRA), with three series of bonds, each with unique maturities and restrictions. The first series, which reached its maximum $5 billion allocation in January, matures in 2027 and does not include the country’s 30% tax on outgoing cash. The second and third series mature in 2025 and 2026.
Turnaround for series 1. After a slow start for the first series of Bopreals last December, the government sweetened the terms, sparking demand. In addition, one member said that “everybody and their mother suddenly wanted in on” the bonds when it became clear they were an effective, reliable way to free trapped cash.
- For one member with outstanding debt to vendors in the US, it took multiple attempts to purchase series 1 bonds, with the BCRA only granting half of their bid on the first attempt. But after subsequent requests in the following weeks, the member was able to free up all of the company’s trapped cash in the country using series 1 Bopreals that they sold on the secondary market for about two-thirds of the bonds’ USD value.
- The company will be able to access Argentina’s blue-chip swap market (an unofficial FX market that carries an unfavorable rate) on April 1 to pay their vendors the remaining value while exempt from a 90-day required waiting period that typically applies to this market—a bonus exclusively for the first series.
Scoring with series 2 and 3. One member, whose company had several million “old and cold” dollars trapped in the country, attempted to access this first series of bonds, but due to such high demand their bank could not get the bid ready in time. The company has subsequently freed more than three-quarters of intercompany debt trapped in the country with purchases from series 2 and 3.
- The member said that, whether or not a corporate works with their bank, there is a bounty of paperwork required to register these debts with the BCRA. “There’s lots of manual work, including uploading many documents, to present yourself with payment,” they said.
- The member was allocated series 2 bond equal to about one-third of the company’s trapped cash. They received an additional amount through a series 3 auction.
- In last week’s auction of series 3 bonds, the BCRA awarded the entirety of 205 requested bids. In a sign the bonds may be satiating demand, nearly $2 billion of series 3 remains and is open to all importers with debts, regardless of registered balances, in this week’s auction.
Hold or sell? Because the bonds do expose a company to sovereign risk, this member is evaluating the secondary market to determine whether—and when—to sell the bonds.
- “And if we take it onto the secondary market, we’d have to figure out how to account for that,” the member said. “I just don’t know if we want to pull that trigger yet, we may just wait to see how it all shakes out.”
