INDEC’s Renaissance Affects the GDP Warrant
The National Statistical Bureau (INDEC) is gradually regularizing its flow of statistical information, and thereby emerging from the catatonic state into which it had fallen when the Macri administration began revising its methodologies, after years of misreporting statistical data.
June’s monthly economic activity reaffirms the current economic contraction. Q2 GDP numbers, to be formally released on September 22nd, should reflect an annualized drop of about -2.8%y/y.
July tax collection results don’t suggest imminent improvement in collection activity. Revenues grew between May and July at 23%-24%y/y, while inflation remained above 45%.
The effect of GDP contraction, combined with the strong downward revision of growth rates in previous years, implies a sharp decline in the value of the GDP kicker. This raises the question of whether there is still value in this instrument.
Too, the legal wording of the debt-restructuring prospectus generates ambiguity over the proper technique to rebase the former 1993 base case GDP to 2004 prices.
Yet, after resolving this ambiguity to our best understanding, our valuation model still indicates that the GDP kicker’s fair value should be around $8.22, well below the current $10.50 market price.
The main reason to justify such higher-than-expected market value is linked to the proposal made by the government to buy back the bond toward the end of the year, with an acquisition floor of $10, and a ceiling of $12.
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