Argentina
Argentine Government Announces New Measures to Boost Consumption, Freezes Gasoline Prices for 90 Days
Wed 08/14/2019 10:35 AM
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Argentine President Mauricio Macri announced a stimulus package today, aimed at boosting consumption before a sharp depreciation in the peso leads to inflation spiraling out of control as the market reacts to the Cambiemos coalition’s loss in Sunday’s primaries. The measures include a freeze on gas prices for 90 days, tax relief for small and medium-sized enterprises, or SMEs, and income tax cuts.
The new policy measures were announced after oil and energy companies such as YPF said they were considering hiking gas prices by 5% to compensate for the peso depreciation this week. Under the new package announced today, gasoline retail prices will be “frozen” for at least 90 days. At the same time, energy utility companies such as Edenor and Transportadora de Gas del Sur, or TGS, will continue to have their rates fixed until December.
YPF’s 8.5% $1 billion notes due in 2021 were trading today at 91.275 to yield 14.8%, while Edenor’s 9.75% $300 million bond maturing in 2022 was quoted at 72.45, yielding 22.2%. Genneia’s 8.75% $500 million 2022 international bond was trading down 26 points this week, to 66.5 today, or 28.8% yield to maturity. A chart reproducing the year-to-date price performance is shown below:
Before the double-digit depreciation of the peso, gas prices were already behind in relation to their import cost. According to YPF’s second-quarter earnings report, gas prices in dollars before taxes were 11% lower compared with the same period in 2018. With a double-digit depreciation of the peso in the past two days, the difference will be even larger.
Release
Argentine President Mauricio Macri announced a stimulus package today, aimed at boosting consumption before a sharp depreciation in the peso leads to inflation spiraling out of control as the market reacts to the Cambiemos coalition’s loss in Sunday’s primaries. The measures include a freeze on gas prices for 90 days, tax relief for small and medium-sized enterprises, or SMEs, and income tax cuts.
The new policy measures were announced after oil and energy companies such as YPF said they were considering hiking gas prices by 5% to compensate for the peso depreciation this week. Under the new package announced today, gasoline retail prices will be “frozen” for at least 90 days. At the same time, energy utility companies such as Edenor and Transportadora de Gas del Sur, or TGS, will continue to have their rates fixed until December.
YPF’s 8.5% $1 billion notes due in 2021 were trading today at 91.275 to yield 14.8%, while Edenor’s 9.75% $300 million bond maturing in 2022 was quoted at 72.45, yielding 22.2%. Genneia’s 8.75% $500 million 2022 international bond was trading down 26 points this week, to 66.5 today, or 28.8% yield to maturity. A chart reproducing the year-to-date price performance is shown below:
Before the double-digit depreciation of the peso, gas prices were already behind in relation to their import cost. According to YPF’s second-quarter earnings report, gas prices in dollars before taxes were 11% lower compared with the same period in 2018. With a double-digit depreciation of the peso in the past two days, the difference will be even larger.
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