With the publication of two decrees in the Official Gazette, the Government gave free rein for the sector agro industrial exporter and regional economies begin to liquidate their Dollars in it BCRA.
Decree 193 is related to exemptions, suspensions of trials and measures in the framework of the agricultural emergency as a consequence of the drought.
The decree, in its recitals, states that 173 million hectares of the Argentine countryside are in drought conditions of which 11.4 million are from agricultural crops and 24.3 million from bovine production.
On the other hand, companies that have not liquidated their dollars as a result of their exports will be subject to strong sanctions if they do not regularize their situation within a short period of 30 days from the publication of the decree.
In this regard, the other decree instructs the BCRA and the AFIP to seek that some 100 companies liquidate some 3,700 million dollars that never entered the market and if they do not do so, the company’s CUIT and its directors will also be suspended.
In addition, companies may be suspended from the registries of importers and exporters and also from the Single Registry of Operators of the Agroindustrial Chain (RUCA). Is about exports that were made from January 1, 2021 to August 31, 2022 which according to government data would not have been settled in the domestic market.
The Government launches different strategies to try to attract dollars and increase the reserves of the Central Bank
“Dollar Agro”: powers to the BCRA to obtain foreign currency
The novelty is that the decree grants the BCRA powers to monitor export currency negotiations in the single foreign trade current account of the AFIP.
For some tax specialists consulted by iProfessional the government would seek implement an export control system similar to that of the SIRA of the Secretary of Commerce to control imports.
To begin to assess the future of the new operation of the “agro” dollar of 300 pesos or third Export Incentive Program that begins this week, it must be considered that:
1) If we compare with the 200-peso “soy” dollar that was launched on September 1 of last year and ended on October 31 of that same year, it is a 50% increase in the exchange rate for agribusiness exporters. %.
2) in September 2022 it reached 290 pesos while the value of the blue dollar today is 393 pesos registering in that period a rise of 35.5%
3) the value of the alternative dollars was the CCL dollar was 297 pesos, which compared to the current 404 pesos registered an increase of 37% while the MEP dollar in the same period increased by 38%.
4) the price of the official dollar in September of last year was 146 pesos while at present it is 218 pesos, registering a rise of 50% in that period.
5) the exchange gap between the official dollar and the parallel dollar today is 90% and in September of last year it reached 85% and today it is 90%
6) the rate of inflation since in September of last year I was traveling at an annual rate of 80% and today that annual inflation reaches 100%
These numbers serve to demonstrate that the value of the dollar that rose the most in that period was that of the official dollar because the BCRA had to accelerate the rate of devaluation of the peso against the dollar due to the rise in the inflation rate, which today is one of the first major problems facing the economy as a result of macroeconomic imbalances.
The rise in the dollar is a consequence of the rise in the inflation rate, therefore if inflation continues to rise, the parallel dollar and the alternative financial dollars will continue to increase because the value of the dollar is one more price of the economy that adjusts for inflation .
Therefore, no matter how many differential exchange rates are applied to certain sectors, the problem will not disappear if macroeconomic imbalances continue in the fiscal, monetary and exchange aspects. This causes importers to demand more dollars than necessary because they believe that dollar is cheap and exporters do not liquidate their dollars because they think that dollar will be more expensive in the future.
Minister Sergio Massa launched a new “agro dollar” for different exportable productions
How many dollars could enter the BCRA for the so-called “agro” dollar
Regarding the estimates of how many dollars could enter the BCRA for the so-called “agro” dollar from the Chamber of the Oil Industry and the Grain Export Center (CIARA-CEC) they estimate that in addition to the 5,000 million dollars for the liquidations of soybeans, to that would be added 600 million in a group of barley, sorghum and sunflower. To this amount could be added another 2,500 million dollars that could liquidate the export sectors of regional economies.
In addition, if between 3,700 and 4,000 million dollars are added that the exporters would not have liquidated, the government estimate is that with this new differential exchange rate of 300 pesos it could reach some 10,000 million dollars of liquidations of the industrial agro-export sector.
As a comparison with the previous differential exchange rates, it should be noted that with the so-called “soybean” dollar of 200 pesos from September of last year, the industrial agro-export sector liquidated some 8,200 million dollars and with the 2.0 dollar of 230 pesos from last December exporters liquidated some 4,000 million dollars.
One of the dangers of this new operation is that dollar purchases from agricultural dollar exporters at 300 pesos could generate a new peso pump that will put pressure on prices.
By increasing the official exchange rate from 215 pesos to 300 pesos, this will cause an increase in the value of the ton of soybeans in pesos and will have an impact on all the prices related to those who buy products related to soybeans because they will have to pay a more expensive soybeans
This could generate a new increase in the inflation rate above the 110% estimated for this year according to the latest projections of the Survey of Market Expectations (REM) released by the BCRA last Thursday.
The soybean dollar was extended to other products
In the third survey of the year, the banks and consultancies that provide the information to the BCRA estimated a monthly inflation of 7.0% for next March and an inflation for the whole year of 110%. This implies a value 10.2 percentage points higher than the forecast from last February’s survey. In turn, the REM participants reviewed the forecasts for all periods, placing inflation at 90% per year for 2024 and at 54.6% per year for the year 2025.
Regarding soybeans, from the economic team they would be looking for a little more than the 7 million tons of the remnant of last season to be liquidated, giving rise to the entry of the first batches of soybeans delayed by the drought in May for what they estimate that liquidations could be advanced for about 10 million tons.
From the consulting firm Portfolio Personal Invesment they calculate that at current prices, the liquidation of 7 million tons would translate into the purchase of reserves for some 3,900 million dollars of which the BCRA would part with a proportion close to 30%, which was the average in the two editions of last year.
According to the latest report from the consulting firm Inveq: “for the third time it is a disguised devaluation, where the exchange rate for the importing sector does not change and the BCRA prefers to avoid the costs of a jump in the value of the official dollar.
The government’s intention is to change the negative trend shown by the liquidations of the industrial agro-export sector. The settlements of the first quarter last were less than 2,800 million dollars and it is the lower level of settlements since the first quarter of 2007 but one of the biggest dangers facing the economy as a result of one of the worst droughts in history is a drop in the level of economic activity that many analysts predict could lead to a recession this year.
The recent numbers of the REM of the BCRA for April project a real drop of 2.7% in the Gross Domestic Product (GDP) for 2023. While for 2024 the projections estimate annual economic growth of 0.7% and for 2025 they indicated that they project a variation of 3.0% of real GDP. Meanwhile, it is expected that during the second quarter of 2023 there will be a contraction of 1.8% in the level of activity, a level of greater contraction expected than in the previous survey. The GDP variation forecast for the third quarter of 2023 is 0.3% quarterly.
The duration of this new stage of the “agro dollar” is 90 days
unfavorable prospects
Despite the monthly rebound in economic activity last January, the outlook for the economy in 2023 remains unfavorable. One of the reasons is purely statistical. Unlike 2022, 2023 has negative “statistical drag.”
The Monthly Estimator of Economic Activity (EMAE) registered a monthly increase of 0.3% in its seasonally adjusted measurement, interrupting 4 months of monthly declines in a row. In the year-on-year comparison, the level of economic activity in January was 2.9% higher than in January 2022.
The instrumentation of the “agro” dollar for soybeans and also for regional economies announced Wednesday by Minister Sergio Massa aims to increase the supply of dollars in the single free exchange market (MULC).
The problem is that it does not solve the increase in the demand for dollars that the BCRA will have at least until the presidential PASS of next August 13 due to advance imports in that market and in alternative financial markets and there are three latent dangers such as a greater monetary issue of the BCRA, a increase in the rate of inflation and the possibility of a recession.
The big question is what can happen on the 46th when the operation of the agricultural dollar or soybean dollar 3.0 ends, since that of the regional economies is 90 days. It is very probable that after that period, many agribusiness exporters will be waiting for a new soybean dollar of 4.0, but it will be the government that will have to decide whether to devalue the peso differentially again for that sector.
