Beruflich Dokumente
Kultur Dokumente
VII
Capital Market
!In the first quarter of 2001, average prices of Argentine fi- By the beginning of March, both indicators of tax co-
nancial assets increased slightly. Stocks recovered with respect llection and industrial activity showed the persistence of reces-
to the average of the fourth quarter of last year, and the same sion and the difficulty to comply with the targets agreed upon
did public securities, so the sovereign risk implicit in their prices with the IMF. Besides, a financial crisis broke out in Turkey that
fell slightly. This modest advance took place within a more provoked the rise of sovereign risk of emerging countries, with
favorable international environment. Face to a strong slowdo- a particular effect over the Argentine economy. Then there came
wn of United States economy and the fall of American stock two changes of Ministers of Economy, and finally the imple-
exchanges, the Federal Reserve implemented since January an mentation of a program with a higher political consensus focu-
aggressive monetary policy that provoked, until June 2001, six sed not just on public expenditure cuts. The Congress and the
successive reductions of short term interest rate. Said rate reduc- executive power approved an emergency fiscal plan, whose first
tion was partially followed by Europe. However, at the closing step included a Competitiveness Law, meant to improve eco-
of this Report, new reductions of corporate profits were an- nomic conditions for the sectors producing tradable goods that
nounced in the United States, with a significant fall of the were most affected by the crisis. For the sake of this, the gover-
growth rate expected for world economy this year. Within this nment resorted basically to a tax on current account transactio-
environment, the fall of the technological stocks listed at the ns, together with a series of tax deductions for sectors such as
NASDAQ continued.
textiles, shoe wear, steel, automotive and other.
was a significant recovery of bonds and stocks price. ment decided to advance the enforcement of a system of wide
1
CAPITAL MARKET
convertibility (by which the peso will be backed in equal parts since January of 2001 the Federal Reserve implemented an
by dollars and euros). As well a tax reform focused on a reduc- aggressive monetary policy through six consecutive decli-
tion of income tax, an increase of employers contributions to nes (up to June 2001) of short-term interest rate, with the
social security and changes in the fuels tax. The plan seeks to aim of avoiding recession. So, the federal funds rate decli-
improve competitiveness and encourage consumption; at the ned from 6.5% at the end of 2000 down to 3.75% at the
time compliance of fiscal targets is guaranteed. end of June this year. Said policy was accompanied by an
also expansive fiscal strategy, since the American Congress
approved a cut of income taxes, which would mean 1.3
I. International outlook
billion additional dollars available for consumption in the
next ten years. The fiscal effect of the measure for the se-
cond semester of year is estimated to be 0.5% of GDP.
United States
ployment rate experienced a slight rise, up to 4.5%. Later 2000, partially reversing the appreciation of the previous
on, by the end of May, there was an acceleration of retail 5 years. In the first quarter of 2001, the main stock indexes
inflation, which amounted to 3.6% p.a., basically as a con- continued falling. By March 2001, the Dow Jones index
sequence of price increase of fuels and electricity. amounted to 9,500 points, with an accumulated loss of
almost 20% from its peaks. In turn, the NASDAQ compo-
In the first quarter of 2001, the plunge of technolo- site indicator, where mainly technological and Internet stoc-
gical stocks had started and in the first quarter of 2001 this ks are listed, undergone a real plunge of 60% from its
process continued, which should impact as a moderation peaks recorded in March 2000, down to levels near 1,800
of consumption during this year. Within that environment, points. From then on, there was a certain recovery until
2
CAPITAL MARKET
TABLE 7.1
International Capital Markets Indicators
End 1997 End 1998 End 1999 End 2000 31-Jan-01 28-Feb-01 30-Mar-01 30-Apr-01 31-May-01 22-Jun-01
May, and both the Dow Jones and the NASDAQ increa- indicated that the stocks decline would continue, in view of the
sed up to levels near 10,500 points and 2,100 points res- successive warnings of lower returns of leading technological
pectively. However, at the closing of this report, perspectives companies, including telecommunications.
3
CAPITAL MARKET
GRAPH 7.1
Yield of US Treasury Bonds
7.0%
1 aæo
5 aæos 6.5%
30 aæos 6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
04/06/1999
08/07/1999
13/08/1999
17/09/1999
22/10/1999
26/11/1999
30/12/1999
04/02/2000
10/03/2000
12/04/2000
19/05/2000
23/06/2000
28/07/2000
01/09/2000
06/10/2000
10/11/2000
15/12/2000
19/01/2001
23/02/2001
30/03/2001
04/05/2001
08/06/2001
Europe
cents of dollar. This reaction diluted again by March, toge-
ther with the fall of world stock exchanges. Besides, the
In the first quarter of 2001, the pace of GDP growth in
European Central bank reduced short-term interest rates
the zone of the euro amounted to 2.5% year-on-year, with a
by the end of May to 4.5% p.a., in view of the clearer
remarkable fall with respect to the variation of the same quarter
evidences of slowdown in the main economies of the re-
of the previous year, when it was 3.5%. Simultaneously, the
gion. Thus, the euro went back to 86 cents of dollar by
decline of unemployment rate seemed to stop, at levels near
mid June. However, in the last meeting of June 7, the ECB
9%. Wholesale inflation remained relatively high (5% p.a.),
decided to maintain interest rates constant, with the aim of
due to the weakness of the euro and the rise of oil price in the
defending the value of the euro in view of the fears of an
last year. Both exports and imports of countries outside the
acceleration of inflation. Retail prices grew 3.4% in May
zone of the euro grew 12% p.a. After the general fall of
(from 2.6% in March), exceeding the limits established by
European stock exchanges in 2000 (in Germany, the DAX
the bank itself as target for the zone of the euro. In Ger-
index had lost 30% and technological papers more than
many, inflation recorded a peak of the last seven years.
50%), in the last months, there is a certain generalized
recovery (3-4%).
Recently, the labor government in Great Britain was
re-elected and, consequently, the debate opened in said
By December 2000, in view of the fall of U.S.
country about its future incorporation to the zone of the
growth, the euro had recovered part of the place lost against
euro. This inclusion is particularly supported by big in-
the dollar in the last two years, exceeding the quote of 90
dustrial corporations and the government, and resisted by
4
CAPITAL MARKET
GRAPH 7.2
Dollar Quotation compared to main currencies
1.2
1.1
0.9
0.8
0.7
Euro/U$S
0.6
29/12/1995
15/03/1996
31/05/1996
16/08/1996
01/11/1996
17/01/1997
04/04/1997
20/06/1997
05/09/1997
21/11/1997
06/02/1998
24/04/1998
10/07/1998
25/09/1998
11/12/1998
26/02/1999
14/05/1999
30/07/1999
15/10/1999
30/12/1999
17/03/2000
02/06/2000
18/08/2000
03/11/2000
19/01/2001
06/04/2001
22/06/2001
150.00
140.00
130.00
120.00
110.00
100.00
80.00
29/12/1995
15/03/1996
31/05/1996
16/08/1996
01/11/1996
17/01/1997
04/04/1997
20/06/1997
05/09/1997
21/11/1997
06/02/1998
24/04/1998
10/07/1998
25/09/1998
11/12/1998
26/02/1999
14/05/1999
30/07/1999
15/10/1999
30/12/1999
17/03/2000
02/06/2000
18/08/2000
03/11/2000
19/01/2001
06/04/2001
22/06/2001
5
CAPITAL MARKET
production, and this shortage coincided with a period of This unfavorable scenario is completed with retail
high cost of oil, of which Brazil is a big importer. Conse- deflation (the only one case within developed countries)
quently, the forecast of GDP growth for 2001 decreased and very low interest rates (0.15% p.a. for the discount
from 4.5% to 3%, and inflation accelerated from the begin- rate), aside from a fall of the stock market of 20% in the last
ning of this year. By May, the increase of consumer prices year. Nevertheless, in the last three months, the stock ex-
exceeded 7% p.a., and it is estimated that they will go on change recovered 13%, although it continues to show his-
rising, pushed by transport and energy. torically low levels of the last 15 years. Unemployment is
still at 5%, although this modest result was achieved at the
The coexistence of inflation with high levels of ex- expense of deepening fiscal imbalance up to 6% of GDP
ternal deficit and fiscal deficit (4% of GDP), aside from the through successive expansive fiscal programs. According to
appearance of political problems within the ruling coalition, IMF estimates, it would probably not prevent a new defla-
provoked important stock exchange falls (-28% in dollars in tion during 2001, in spite of the increase of imported fuels
the last year). At the same time, there was a rise of country prices.
risk up to 850 basis points in June, and the real plunged.
The currency fell from R$1.96 per dollar in last December The fiscal imbalance coexists with a strong external
down to less than R$2.45 per dollar in June, which would surplus, since the current account excess amounts to 2.5%
mean a nominal fall of 25%. The Central bank had to take of GDP. Traditionally, this excess is partly allocated to the
part selling dollars and securities indexed by the dollar. Ne- purchase of American debt bonds. An important recovery
vertheless, industrial growth continues to be remarkable, for of growth in the future seems improbable, since public debt
example in the case of automotive (24% p.a.). Argentina amounts to 130% of GDP and many banks continue
took advantage of this bull market, and its exports of cars to showing low solvency ratios, with non-performing loans for
Brazil increased approximately 50% in 2001. more than 300,000 million dollars. The government refu-
ses to reform the financial system, where foreign banks play
a much smaller role than in other developed economies.
Japan
However, these irregular loans did not provoke any deposit
flight crisis up to now, since the government guarantees all
In Japan, GDP growth had been moderate in 2000 placements.
(1.5%). However, in the first quarter of 2001, there was a
trend switch, and GDP fell slightly (-0.1%). Economic The yen fell constantly against the dollar during the
analysts estimate that the contraction will be repeated in the last months, from near 100 yens per dollar at the beginning
second quarter, and that it would probably result in a nil of 2000, to more than 120 by last March. In the last mon-
result for 2001. Thus, Japan would continue showing the ths, it remained relatively constant, at 124 yens per dollar at
worst result within the main developed economies. It is the closing of this report. With this evolution, it is probable
worth pointing out that Japan was the economy with the that external demand continue to be the key of recovery, in
poorest performance within the G-7 during the last fifteen an economy where big corporations are strongly focused on
years, with a growth of just 3% since 1996. the world market.
6
CAPITAL MARKET
II. Evolution of the Argentine Stock until again reaching lows of 400 points at the end of March. It
Market is worth adding as explanation the persistence of the recession
during the first quarter, when GDP went back again to 2.1%
In the first quarter of 2001, after obtaining the loan Report, after the approval of the debt swap and the measures
known as “financial shield” and the better expectations, there taken to advance wide convertibility to the external sector, the
was an important recovery, thus the MERVAL was near 540 index recorded 420 points, slightly above the 2000 close, but
points by the end of January. This rise was enough for the some 20 points below the last day of March. A similar evolu-
quarterly average to be 471 points, 12% above the fourth quar- tion followed the BURCAP indicator during the first quarter,
ter of the previous year. Nevertheless, at the end of February, which with 790 points average in May was 14% below the
the stock exchange returned to falling, which became deeper average of 2000.
GRAPH 7.3
Merval Index
Weekly closing
700
600
500
400
300
02/01/1998
20/02/1998
08/04/1998
29/05/1998
17/07/1998
04/09/1998
23/10/1998
11/12/1998
29/01/1999
19/03/1999
07/05/1999
25/06/1999
13/08/1999
01/10/1999
19/11/1999
07/01/2000
25/02/2000
12/04/2000
02/06/2000
21/07/2000
08/09/2000
27/10/2000
15/12/2000
02/02/2001
23/03/2001
11/05/2001
7
CAPITAL MARKET
is strongly unfavorable, since the MERVAL had exceeded 800 the main Argentine securities.
points in the third quarter of 1997. However, in the last
year, the evolution of international stock exchanges was, The annual deterioration of Argentine sovereign
in general, also negative. In the first week of June, an- risk is significant since, in the same period, the risk co-
nual falls of 28% for Brazil and 24% for Chile (in do- rresponding to the group of emerging countries decrea-
llars) were recorded, as well as declines of around 20% sed practically 100 points, as a consequence of the pro-
to 30% for most of Asian emerging markets. Also in the gress made by some markets in Eastern Europe and Asia.
last year, stock exchanges in Germany, France, Italy and This means that Argentina decreased some 300 basis
United Kingdom have stopped growing, and in some points as a whole with respect to the average risk of
cases such as Japan, the plunge amounts to 30%. Only emerging markets during the last year. In Latin America,
Mexico diverted from the general trend, with a 20% the evolution was, in general, negative because Argenti-
profit in dollars (Table A 7.3 of statistical appendix and na dragged the rest of the region, although the increases
Graph 7.3). were much lower for Mexico and Brazil. In our country,
the persistence of recession, the insufficient advances in
the fiscal front and certain reserves on the part of inter-
III. Evolution of Quotes and
national investors about long term fiscal solvency, pro-
Public Debt Placements
voked an important relative decline of public securities
prices, as compared to the average of emerging coun-
tries. For example, the traditionally positive difference
1. Evolution of sovereign risk
between Argentine and Brazilian sovereign risk reversed
along the year, from 131 basis points in the first quarter
In the first quarter of 2001, there was in average
of 2000 (lower risk for Argentina), until becoming ne-
a minimum decrease of sovereign risk 1 implicit in the
gative in the first quarter of 2001 (lower risk for Brazil
price of public securities compared to the previous quar-
by 22 basis points). More recently, the latter trend be-
ter. The indicator calculated by J.P. Morgan for Argenti-
comes deeper.
ne securities (EMBI Argentina) decreased from 807 ba-
sis points in the fourth quarter of 2000 down to 752 By the end of last year, the government announ-
basis points. However, compared to the first quarter of ced a contingent loan facility from the IMF and other
2000, there appears a strong deterioration of the index, credit international agencies, plus the commitment of
which rose almost 37% in that period (200 basis po- local banks for the renewal of debt. This fact was added
ints). Graph 7.4 and Table 7.2 show the evolution of to the sudden fall of United States interest rate at the
1 Such indicators are defined as a spread between yield rates of the different dollar securities of the country and yield rates of the United States Treasury bonds
of similar term.
8
CAPITAL MARKET
GRAPH 7.4
Sovereign Risk
In basis points
G LO BA L BO N D S
RA 03
1200
RA 17
1050
900
750
600
450
300
12/30/99
01/19/00
02/08/00
02/28/00
03/19/00
04/08/00
04/28/00
05/18/00
06/07/00
06/27/00
07/17/00
08/06/00
08/26/00
09/15/00
10/05/00
10/25/00
11/14/00
12/04/00
12/24/00
01/13/01
02/02/01
02/22/01
03/14/01
04/03/01
04/23/01
05/13/01
06/02/01
06/22/01
BRA D Y BO N D S
PAR
STRIP 1,500
DISC.
STRIP
FRB
1,100
700
300
12/30/99
01/19/00
02/08/00
02/28/00
03/19/00
04/08/00
04/28/00
05/18/00
06/07/00
06/27/00
07/17/00
08/06/00
08/26/00
09/15/00
10/05/00
10/25/00
11/14/00
12/04/00
12/24/00
01/13/01
02/02/01
02/22/01
03/14/01
04/03/01
04/23/01
05/13/01
06/02/01
06/22/01
beginning of January, which allowed a soft fall of risk the resignation of the minister of economy, expecta-
during January and February, together with the impro- tions worsened and the Argentine EMBI exceeded
1,000 basis points in the third week of March. The
vement of the stock market and the fall of local interest
change in the economic management was not enough
rates. However, after certain real economy indicators and
at the beginning to improve expectations, and after a
the fiscal collection of February were known, and after
slight decrease, the Argentine EMBI reached peaks of
9
CAPITAL MARKET
TABLE 7.2
Evolution of sovereign risk
In basis points
almost 1,300 points at the end of April, figures that average of 994 basis points. After the implementa-
had not been recorded since the Russian debt crisis tion of the debt swap, at the beginning of June, the
September of 1998. EMBI fell 100 basis points in two days, although it
then increased temporarily. At the closing of this
In May, the indicator remained high, with an chapter, the indicator was still high, some 985 basis
10
CAPITAL MARKET
TABLE 7.3
International market issues in 2001
Date of Currency Amount Amount Term Coupon Spread
Security issue issued in d ollars -years- rate
(1) (2) (3)
TABLE 7.4
Bond placements in the international market
Issues Amount Average Spread
Year Volume in dollars Life
(1) (years) (2)
1994 (*) 19 2,600 3.3 238
1995 18 6,370 4.0 371
1996 30 10,413 8.2 395
1997 18 10,214 14.9 310
1998 24 11,664 13.3 429
1999 40 11,869 7.6 594
2000 16 12,359 11.8 536
2001 (**) 11 31,910 16.9 973
(*) Excludes syndicated loan for U$S 500 millions
(**) First semester
(1) In millions, as of the date and exchange rate of issue
(2) Over U.S. Treasury Bonds of similar duration
Source: Public Credit National Office, Ministry of Economy.
11
CAPITAL MARKET
TABLE 7.5
Public Debt Issues in the domestic market
In 2001
Treasury Bills (LETES)
Placement Date Currency Amount (1) Term Disc. Rate N.A.Rate Status
09-Jan-01 DOLLAR 369.1 94 8.29% 8.47% Cancelled
09-Jan-01 DOLLAR 362.9 182 8.76% 9.17% Cancelled
23-Jan-01 DOLLAR 356.9 91 6.64% 6.75% Cancelled
06-Feb-01 DOLLAR 350.0 91 6.60% 6.71% Cancelled
06-Feb-01 DOLLAR 354.0 182 7.09% 7.35% Cancelled
20-Feb-01 DOLLAR 350.0 91 6.74% 6.86% Cancelled
13-Mar-01 DOLLAR 350.0 182 8.50% 8.88% Outstanding
13-Mar-01 DOLLAR 506.7 364 10.50% 11.75% Outstanding
27-Mar-01 DOLLAR 353.0 91 10.67% 10.96% Cancelled
10-Apr-01 DOLLAR 350.0 88 10.09% 10.35% Cancelled
10-Apr-01 DOLLAR 350.0 179 11.24% 11.91% Outstanding
08-May-01 DOLLAR 350.0 91 12.06% 12.44% Outstanding
22-May-01 DOLLAR 350.0 92 11.73% 12.09% Outstanding
22-May-01 DOLLAR 150.0 169 11.75% 12.44% Outstanding
12-Jun-01 DOLLAR 350.0 91 7.74% 7.89% Outstanding
12-Jun-01 DOLLAR 350.0 182 9.43% 9.90% Outstanding
TOTAL 5,602.6
the first half of 2001 amounted to U$S 31,910 millions, a were made for U$S 3,539 millions (Table 7.3), including two
peak record for Argentina. This amount includes the swap mega issues of Global Bonds for U$S 2,094 millions. Maturities of
transaction for U$S 28,371 millions, analyzed in detail in an these debt instruments were agreed upon between 6 and 30
Annex to this chapter. Additionally, other placements of debt years. In the first semester, the average spread of all these securi-
12
CAPITAL MARKET
ties over American treasury bonds with the same term was 973 ve (reduction of United States rates, slight strengthening of the
basis points, with an average duration of around 16.9 years. euro and better commodities prices) reinforced the fall of rates
This meant an average longer term of 5 years as compared to at the beginning of January, when 90 days’ LETES declined to
placements made in 2000, although spread levels also increa- 8.5% p.a. And even more at the beginning of February, when
sed significantly (a rise of more than 300 basis points with only 6.7% p.a. was paid for 90 days.
respect to the average spread of previous year) (Table 7.4).
By the end of February, the Turkish financial crisis took
Analyzing placements by type of currency, it can be place and, after knowing our country’s fiscal and real results for
seen that more than 95% was denominated in dollars, and the said month, expectations worsened again. In this environment,
rest corresponds to issues in euros and in pesos. This composi- two ministers of economy changes took place and the percep-
tion was strongly influenced by the debt swap transaction, tion of sovereign risk was higher, thus suspending the auction
which involved all the old series of bonds issued in American of the beginning of March. In the auction at the end of March,
currency. The difficult conditions of the international debt however, the 90-day rate was 11% p.a., somewhat lower than
market faced by our country in the new issues placement’s, expected by the market, and even at the beginning of April,
partly derived from the delicate fiscal situation. As well, the rise there was a new decline to 10.4%. Nevertheless, the lack of
of the sovereign risk implicit in the price of bonds during Mar- economic reactivation and the scenario of fiscal fragility was
ch to June eventually provoked the swap transaction, which translated into a fall of domestic confidence during May, when
had to accept high interest rates in dollars for longer terms than the LETES rate exceeded 12.4% at the beginning of May and
the ones prevailing up to then. remained at 12.1% at the end of said month. Finally, after a
successful debt swap at the beginning of June, lower rates were
Domestic market obtained in the last auctions: 7.9% for 90 days at the begin-
ning of June, and 9.1% at the end of the same month.
During the first quarter, most Treasury Bills (LETES)
auctions scheduled in the local market were performed, on a bi- As regards the other placements in the local market, it is
monthly basis since 2000 (Table 7.5). According to the sche- worth mentioning that during the first quarter of 2001 Trea-
dule, the auctions made at the beginning of each month, LE- sury Bonds (BONTES) were issued for U$S 3,028 millions.
TES were placed at 91 and 182 days’ terms (except in March), This debt was mostly used for the bond swap (U$S 2,608
and in the auctions made at the end of the month, bills’ term millions), and the rest was place in cash. Finally, promissory
was 91 days. notes discount during the months already elapsed of 2001
amounted to U$S 2,210 millions and, the same as for LETES,
Along the first quarter, interest rates showed an erratic
there was an increase of interest rates compared to last year.
course. As a consequence of the announcement of the IMF
contingent loan, the rate in the December 2000 auction of
LETES for 91 days had fallen to 11.8% p.a. (compared to the IV. Private Pension Funds Investments
peak of 12.6% paid in November), and the one corresponding
to 182 days did so to 12.2%. The best international perspecti- As of April 30, 2001, the value of private pension funds
13
CAPITAL MARKET
TABLE 7.6
Private pension funds investments
In thousand Pesos
% 31-Dec-98 31-Dec-99 30-Apr-01
Limit Amount % Amount % Amount %
(1) Fund Fund Fund
I. Cash and Cash Equivalents 175,239 1.5 163,040 1.0 157,243 0.73
II. Investments 11,351,155 98.5 16,624,059 99.0 21,474,982 99.27
Public securities issued by the National govt. 50 5,530,824 48.0 8,141,465 48.5 10,606,959 49.03
Negotiable Publ. Sec. issued by Nat'l govt. 2,292,438 19.9 3,731,782 22.2 4,112,513 19.01
Publ. Sec. issued by Nat'l govt. - Forward 3,238,386 28.1 4,409,683 26.3 6,494,446 30.02
Securities issued by State Organisms 15 231,125 2.0 637,630 3.8 1,023,404 4.73
Negotiable Sec. issued by State Org. 100,359 0.9 167,600 1.0 103,520 0.48
Sec. issued by State Org. - Forward 52,535 0.5 22,711 0.1 168 0.00
Provincial Govt. Securities 46,132 0.4 391,226 2.3 765,780 3.54
Municipal Govt. Securities 32,098 0.3 56,093 0.3 153,936 0.71
Long term Corporate Bonds 28 193,151 1.7 238,660 1.4 425,644 1.97
Short term Corporate Bonds 14 83,223 0.7 105,466 0.6 90,776 0.42
Convertible Corporate Bonds 28 11,839 0.1 14,245 0.1 0 0.00
Fixed Term Deposits 28 2,170,132 18.8 2,597,395 15.5 3,479,455 16.08
Fixed Term Certificates 173,087 1.5 2,084,794 12.4 3,223,063 14.90
Variable return fixed term deposits 1,997,045 17.3 512,601 3.1 146,312 0.68
Prepayable Fixed term deposits 0 0.0 110,081 0.51
Corporate stocks 35 1,823,508 15.8 3,199,541 19.1 2,371,770 10.96
Public companies stocks 14 292,170 2.5 249,218 1.5 257,538 1.19
Mutual Funds 14 759,377 6.6 1,054,646 6.3 1,925,183 8.90
Closed Mutual Funds 3,716 0.0 12,292 0.1 11,196 0.05
Open Mutual Funds 427,795 3.7 592,668 3.5 304,188 1.41
Financial Trusts 327,866 2.8 449,686 2.7 1,609,798 7.44
Foreign sovereign securities 10 220 0.0 211 0.0 0 0.00
Foreign corporate securities 7 28,700 0.2 61,263 0.4 927,150 4.29
Foreign corporate stocks 830,483 3.84
Foreign corporate securities 28,364 0.13
Mutual Funds according to article 3 Instruct. 18/00 68,303 0.32
Regional Economies (*) 163,809 1.4 236,802 1.4 305,701 1.41
Real Estate Mortgage bonds and bills 28 40,365 0.4 14,151 0.1 10,069 0.05
Futures and Options 2 - - 40,780 0.2 12,479 0.06
Direct Investment Funds 10 21,497 0.2 32,586 0.2 38,853 0.18
III. Total Pension Funds 11,526,393 100.0 16,787,099 100.0 21,632,225 100.00
(* ) Th is type of in vestm ent o nly app lies to Naci n A.F.J.P. an d h as a m a xim um of 50% o f the total.
(1 ) Maxim um percen tag e per in stru m ent th e p ension fund s is authorized to invest.
So urce: Secretary of Econ om ic Policy, b ased o n S.A.F.J.P. [Pension fund Su perinten den t]
amounted to approximately $ 21,632 millions, around 7.6% Historically, the average profitability of the system was 11.2%
of GDP. This represented a decrease of 1.5% with respect to p.a. by the end of April of 2001, some two points less than one
the end of January 2001. Average profitability in April 2001 year before. It is worth pointing out that during the last three
compared to the same month of 2000 was just 2% y/y, some years (April 1998 - April 2001) the average profitability of the
12 points lower than the previous year. This meager result is system was somewhat lower than 5% p.a., due the fact that in
basically the consequence of the fall of stocks and public secu- that period two years of bad results were recorded (1999 and
rities, due to the rise of country risk during the last two quarters. 2001) and only 2000 was clearly positive. The system’s con-
14
CAPITAL MARKET
centration increased after the merger authorized last year, so the for 49% of investments in April 2001 (values slightly higher
four bigger managers are now responsible for 73% of total than the 48.5% recorded at the end of 1999). These percen-
funds of the system and 75% of contributors, and the rest is tages are closer to the maximum allowed for this investment
distributed among nine companies. In the last months, there category, namely 50%. Within these instruments there was a
have even been new acquisitions. change in the different categories with respect to December
1999. There was an increase in the portion of these securities
During the last year, the number of registered persons valued on an accrued basis and that will be kept until maturi-
of the private pension system increased by approximately ty2 , which now account for 30% of funds, and a slight decrea-
480,000 persons, up to a total of 8.54 millions but, in contrast, se of the share of negotiable securities (19%). Securities issued
the number of contributors remained practically the same (3.36 by state agencies (mortgage-backed, banks, provincial and
millions). This means that the relation between contributors municipal governments securities) represented at the end of
and registered persons fell down to lows of 39.1% in April last April 4.7% of total funds, with a slight fall over the figures
2001. It is worth highlighting the fact that 95% of contribu- recorded at the end of January 2001.
tors are salaried workers, and only the remaining 5% are self-
employed. So, the average accumulated funds per registered Stocks in their two categories (of corporations and pri-
person are slightly in excess of $ 2,500. vatized state-owned companies) continued losing share within
managers’ investments. In April 2001, they accounted for just
Tables 7.6 and A 7.4 (the latter of the statistical appen- 12.2% of the total portfolio, going down to the third place
dix) and Graph 7.5 show in detail the composition of the within managers’ preference due to both the fall of quotes and
funds administered by private pension funds. Table 7.6 shows the decrease of stock’s volume. This percentage implies a strong
that, during 2001, there were few significant changes of said decrease with respect to the end of 1999 (20.6%) and even
composition measured in percentage points. National public with respect to April 2000 (19.5%).
securities maintained their share and provincial and municipal
securities increased slightly. There was a strong increase of secu- In April 2001, fixed term deposits were second
rities issued by foreign corporations, whereas the most impor- within managers’ preferences, with 16.1% of total funds,
tant fall was verified for national corporations’ stocks, even pri- which implies an increase of two percentage points with
vatized companies and, to a lesser extent, in fixed term deposits. respect to January 2001. Term deposits with variable yield
The funds place in financial trusts also increased. (DIVA) 3 and those with a pre-payment option account
for only 7% of total term deposits, most corresponding to
Analyzing these movements in detail, it can be seen the traditional fixed term deposits with a fixed yield. The
that National Public securities are the instrument with the hig- rise of fixed term deposits during the last months is the
hest share within private pension funds portfolios, accounting result of the increase of rates due to their higher relative
2 It is worth remembering that in the case of these securities (either issued by the Federal Government or by other government agencies) there is the possibility
of pricing part of them not at market value but on an accrued basis, i.e., at their purchase price adjusted for the compounding of the internal return rate the
security had at the time of the purchase, in which case the security has to be retained until maturity. By valuing securities this way, the private pension funds
try to ensure value increases of their shares at a low risk. On the contrary, the portion of negotiable securities is valued at market prices and, consequently,
is subject to capital market volatility.
3 These deposits have guaranteed principal and their yield is based on the evolution of an underlying financial asset (national or international stock index,
stocks, public securities).
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CAPITAL MARKET
security within a complex economic environment. total investments (to a good extent thanks to certificates repre-
senting stocks of privatized companies now Spanish traded in
Some categories of investment have advanced lately. the local stock exchange). Negotiable obligations increased to a
On the one hand, securities of government agencies, provincial lesser extent, from 2.1% to 2.4% of the total (though they
and municipal, went from accounting for 2.6% of investments decreased with respect to January this year). Mutual funds re-
at the end of 1999 to 4.7% in April 2001. Secondly, there covered some share within private pension funds portfolios
were advances in the portion of foreign companies’ securities, during the last year (from 6.3% to 8.9% of the total), especially
which grew between the same dates from 0.4% to 4.3% of the portion corresponding to financial trusts (7.4% of total).
GRAPH 7.5
A.F.J.P. Investments as 04-30-01
6,41% 53.76%
Mutual Funds Government Securities
6.71%
Others
2,27%
Corporated Bonds
16.08% 12.15%
Term Deposits Shares
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CAPITAL MARKET
ANNEX
On June 1º, 2001, a public debt securities swap tran- compress the Government’s short-term financial needs, so as to
saction took place that, due to its size, received the name of dilute any type of uncertainty about the Argentine State’s capa-
“mega swap” and it is the first example of a mechanism to solve city to comply with its obligations. On the other hand, the
a debt crisis. The basic objective of this transaction was to de- transaction releases pressure on capital markets, which allows
TABLE 7.7
Description of the new bonds
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CAPITAL MARKET
TABLE 7.8
Decrease of debt services up to 2005
Principal and Interests, in million US$
releasing resources to finance investment projects of companies ly, in the third and fourth quarters, the reductions of the fiscal
and individuals. imbalance due to the termination of interest payments of secu-
rities redeemed will also not be considered overcompliance, but
It has to be pointed out that the debt swap implies the rather the fiscal result target will be adjusted downwards.
adjustment of the government’s deficit target agreed upon with
the IMF for the second quarter as a consequence of the pay- That is why, when the public accounts commitment of
ment of accrued interest of securities that were redeemed, so the federal government was confirmed, the transaction does
this mismatch will not be considered non-compliance. Similar- not imply a fiscal relax, although it is true that the Government
GRAPH 7.6
Decrease of debt services up to 2005
In million US$
5,000
4,500
4,000 Interests
3,500 Principal
3,000
2,500
2,000
1,500
1,000
500
-
2001 2002 2003 2004 2005
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CAPITAL MARKET
TABLE 7.9
Debt average term and yield
Variation of Variation of
Security averge life Yield
(in years) (a)
Promissory Note 06 2.63 -1.70%
Global 08 $/US$ 4.60 0.33%
Global 08 3.35 -0.44%
Global 18 -0.35 0.22%
Global 31 5.33 -0.33%
Total 2.78 -0.35%
reduces deficit in the medium term as a consequence of lower ns, there were bids for US$ 32,854 millions, of which US$
interest rates and modifies short term solvency ratios. 24,451 correspond to the non competitive tranche ($ 5,137
millions from Official Banks) and US$ 8,402 millions to the
As a whole, the transaction meant to concentrate in 5, a competitive tranche. Of the total, accepted bids amounted to
total of 46 bonds eligible for the swap, denominated in pesos US$ NV 29,523 millions (US$ residual NV 28,175 millio-
and dollars. Three of the new securities are in dollars and matu- ns) of old bonds, and in turn new bonds were placed for US$
re in 2008, 2015 and 2031, and there is a fourth security NV 30,431 millions. The transaction generated a reduction
instrumented in dollars or in Argentine pesos maturing in 2008. of debt services (principal and interest) until 2005 for S$
16,047 millions, of which US$ 7,822 millions correspond to
Besides, a promissory note in dollars with 5 years’ term was
the rest of 2001 and to 2002, as seen in Table 7.8 and Graph
offered to redeem securities of the same type maturing this year
7.6.
and in 2004. Securities maturing in 2015 and 2031 have a
grace period of five years in which accrued interest will be com-
As a consequence of the transaction, the average term
pounded. Table 7.7 is a summary of the main characteristics of of the debt was extended, since a bond portfolio is swapped
the new bonds. for another with an average life of 2.78 more years. As a coun-
terpart, average yields increased by 35 basis points (12 bp per
Of a total of eligible bonds of US$ NV 66,314 millio-
year of extension of average life), as detailed in Table 7.9.
19