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Debt doesn't pull a draw: payments are 74.5% higher from interest
Clarin
January 24, 2012

Despite the "debt reduction" policy, public debt continues to be a weighty issue for Argentina. Last year, the government paid 41.187 billion pesos in interest. It represents 74.5% more "due to the incidence of the GDP coupon, which didn't pay out in 2010 and did in December 2011," according to a report from ASAP.

The magnitude of the 41.187 billion is such that it surpasses the entire budget of the Ministry of Education, Culture, Science and Technology, which came to 39 billion pesos. Or equivalent to 80% of the total capital spending that includes investments in the public sector.

And it's almost 10% of total spending.

The measure of interest is only registered in what was paid out, but the account is bigger because some bonds capitalize interest on payments after a few years or at the expiration of the bond.

The GDP coupon implies that, with greater growth, the more interest Argentina must pay on part of the public debt. However, many specialists argue that the payouts were huge because the statistics from INDEC influence the weight of that interest. It's known that the manipulation of the price indices also means that the economic growth figures are higher than reality, adding to the GDP coupon bond's value.

On the other hand, that same manipulation brought down the bonds that adjust for inflation which, in great proportion, are in the hands of ANSeS.

Thus, part of that interest is collected by public entities (like ANSeS) by bonds and Letters that it holds, but in smaller proportion. That is due to those dependencies having paper whose interest is capitalized or yields less.

It is calculated that more than 80% of the interest burden corresponds to collections from private creditors. In addition to the GDP coupon, interest was an increase for the rise in debt that already comes to US$175 billion.

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