Cristina launches provincial debt restructuring
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From now on, provinces will pay an annual interest rate of 6 percent; and the inflation adjustments on interest payments are eliminated, which will save up to 40 percent in the capital and interest payment between the current year and 2015.
The federal program will not be implemented in the provinces of Santa Fe, Santa Cruz, San Luis, La Pampa and Santiago del Estero, since these districts are 'debt free'. The above mentioned provinces will keep on receiving compensation funds (around ARG$ 3.12 billion) due to their good fiscal performance and bailout avoidance. This means those districts with important fiscal issues and excessive increase of public spending will benefit from the national administration once again.
Governors yesterday had a double reason to celebrate: on one hand, this measure will alleviate the burdens on the provincial treasures in the current year and also in 2012, amidst an ongoing framework of a strong reelection outlook. On the other hand, the official plan certainly includes the reduction of the interest rate in the debt incurred by the provinces with the federal administration up to 2015, while it also improves the deficitiary situation of most provinces.
After the presidential announcement, Córdoba Governor Juan Schiaretti said that the provincial financial instruments worth ARG$ 1.1 billion to be due between 2010 and 2011 "are now re-financed under a six percent annual interest rate."
Buenos Aires Governor Daniel Scioli meanwhile considered the program is "a strong support to the fiscal management policies implemented in our province."
"The measure represents a debt-swap and a relief for the provincial financial burdens," according to Jorge Sapag from Neuquén.
San Juan Governor José Luis Gioja said that the plan will diminish the pressure exerted on the provincial representatives in the Congress regarding the check-tax law annulment. "This measure benefits both the Kichnerite sector and the members of the opposition," Gioja added.
Mendoza Governor Celso Jaque praised the "grace period" valid until December 2011, and considered the elimination of inflation adjustments on interest payments "is very important."
"This must be one of the most federal measures even implemented in Argentina," according to President Cristina Fernández de Kirchner. "Provinces will access better interest rate than that paid by the federal government," she added.
Also, Buenos Aires province Economy Minister Alejandro Arlía, highlighted the measure's provincial acceptance. Cristina Fernández de Kirchner's plan helps Arlía's province to save ARG$3 billion in 2010, and ARG$ 5.6 billion in 2011. "Firstly, the grace period is extended; in second place, the inflation adjustments on interest payments are eliminated; in the third place, we will pay lower annual interest; and fourth, our province will save ARG$ 8.9 billion," the official explained.
"Our province had the possibility of receiving ARG$ 9.8 billion, but we have a debt of around ARG$73 million with the federal administration. By implementing this plan, the federal government actually solves our debt issue," Arlía added.
Translation by Jimena Gibert