The next few months will be complicated in terms of the exchange balance, according to the opinion of the main operators of the local market and Wall Street.
To this must be added the negative effect of the drought and that the incentives for the agricultural sector to liquidate are less and less, the trade surplus tends to decrease compared to April/May and the government must face interest payments on the debt in dollars for approximately 1 billion.
At the end of the week, the parallel dollar closed at 469 pesos, the CCL dollar at 455 pesos and the MEP dollar ended at 422 pesos. While the retail dollar ended at 236 pesos and the wholesale dollar at 226 pesos, registering a exchange rate gap of 110%.
After stopping the third exchange rate run so far in the government of Alberto Fernández, the first was in October 2020, the second in July last year, the economic team has three clear objectives:
-Avoid a sharp devaluation of the peso in the official single free exchange market (MULC) before the presidential PASO on August 13.
-Trying to keep the inflation rate on a path between 7% and 8% per month from now until the end of the year, considering that the April number will be above 7% per month. The latest numbers of the BCRA projection for April show inflation of 7.5 per month for this month and 126.4% per year for the end of the year.
-Getting an advance of some 10,800 million dollars of IMF disbursements that would only be enough to pay the maturities that remain with the agency for this year.
The skyrocketing of financial dollars two weeks ago evidenced the profound deterioration of macroeconomic conditions
In this regard, the latest report from the financial consultancy Consultatio Plus explains that: “in this context, the challenge for the government now seems to be to reach the elections without an exchange rate jump and the market does not trust this, although the possibility of advancement of disbursements scheduled for this year by the IMF”.
The skyrocketing of financial dollars two weeks ago evidenced the deep deterioration of macroeconomic conditions.
The report also points out that it is a double problem: both flows and stocks.
In terms of flows, the impact of the drought on the liquidation of agriculture could not be contained for now with the latest version of the agricultural dollar of 300 pesos against an official dollar of 225 pesos.
It should also be noted that in terms of the stock of gross international reserves, it reached its lowest level during the Fernández administration and the net reserves, according to the estimates of different consultancies, range between 1,000 million, the most pessimistic projections, and 500 million, the most positive. pessimists.
In any case, the worst record since December 2015 at the end of the second term of Cristina Fernández de Kirchner with Axel Kicillof in the Ministry of Economy.
Does the Government have possibilities of avoiding an exchange jump?
The tools to avoid an exchange jump are reduced, and in this context the government would have requested the advance of the pending disbursements for this year by the IMF of around 10.800 million dollars. But if approved, it will hardly come without any conditionality.
In one way or another, the current exchange rate scheme – with an artificially appreciated real exchange rate – will have to be modified. The unknown goes through what kind of solution will be proposed.
At this very controversial point for the economic team, the consultant’s report asks: Devaluation, splitting, or will the mamushka of traps continue?
In this regard, he points out that: “the flows are complicated and the current version of the Export Increase Program (PIE) is not showing the results that the government expected.”
It must be considered that since its inception on April 12, the accumulated liquidation in 18 rounds only reached 25% of the goal initially set by the government of some 8,000 million dollars.
In comparison, at this point the first soybean dollar of 200 pesos from last September had accumulated a liquidation equivalent to 131% of the initial goal of 5,000 million dollars, while the December 2.0 dollar reached 80% of the goal of 3,000 million of dollars.
Regarding the flow of net purchases of foreign currency by the BCRA, the situation becomes more complicated.
The accumulated balance is favorable but barely reaches 180 million dollars. In contrast, at this point the BCRA accumulated net purchases of 4,000 million and 1,250 million dollars with the soybean dollar and with the 2.0 dollar, respectively.
But what is most complex is the future exchange scenario for the two previous systems. In this case, a combination appears that could be very explosive due to the early liquidation during the first two schemes in the loose markets, to which is added the impact of the drought on the stocks.
This generates a dollar supply drop to which is added an increase in the demand for imports that still remains high and that for now is managed in a very discretionary manner.
In April, according to CIARA-SEC data, the cereal-oilseed agro-industrial sector liquidated some 2,435 million dollars compared to some 3,171 million in April last year, which implies 23% less.
What is encouraging is that last week the average settlement of the agricultural dollar increased, but as the days go by the scheme loses appeal because the difference between the official dollar and the alternative financial dollars is reduced.
On the other hand, the increase in the inflation rate and the acceleration of the rate of devaluation of the official exchange rate imply that exporters have less and less incentive to sell those dollars to the BCRA.
What is encouraging is that last week the average settlement of the agricultural dollar increased
This difference in attractiveness to settle between the soybean dollar and the agricultural dollar is due to two factors.
First of all, the first scheme started with a higher spread against the official dollar compared to the other two versions.
But in addition to accelerating inflation and the reduced stock of international reserves, and in the midst of a currency run in recent days, the BCRA had to increase the rate of devaluation of the peso.
In this regard, based on what has transpired in the financial market, the IMF’s intention would not be to sustain the current situation, but to seek some type of modification in the current exchange rate regime but with greater support in net international reserves (NIR).
In the menu of options there is an exchange rate unfolding, perhaps the least bad solution in the short term, although we do not rule out the request for a moderate devaluation either.
At the local level there are no favorable drivers. The country’s macroeconomy continues to deteriorate, with inflation rising and the BCRA’s net reserves continuing to fall
It is true that there are no reasons to counteract the effects from abroad either, but if a renegotiation of the agreement with the IMF is carried out to advance the disbursements of the remainder of 2023, there could be the possibility of achieving a kind of exchange rate until PASO on August 13 next.
