Sergio Massa Yesterday he went through his worst day since, at the beginning of August of last year, he took charge of the Ministry of Economy. In a few hours, the blue dollar and the financial dollars, which are operated through banks, registered increases of up to $20. A disturbing magnitude, and one that seems impossible to sustain the stability of the Argentine economy.
The concern in the Palacio de Hacienda is that this week a currency run that jeopardizes the delicate economic balance.
Unlike other times in recent years, this time there are not too many instruments left to stop a bullfight: starting with the Central Bank reserveswhat in net terms barely reach the US$1.8 billionaccording to various leading economic consultants.
Throughout the afternoon of Tuesday, in full escalation of the dollar, the versions of Massa’s resignation flew over the management of some banks. Later, the one who submitted the resignation was Antonio Aracre, Alberto Fernández’s chief adviser, in the midst of versions of an alternative economic plan that the former Syngenta would have presented to the President.
The $10 billion pothole: wink from the US?
Massa’s diagnosis is that, due to the brutal drought, He still needs to get US$10,000 million. The climatic shock will subtract, in total, between US$20,000 and US$22,000 million. The minister says that he could find part of it in the multilateral organizations (World Bank, IDB and CAF), but that this is not enough to clear up the uncertainty.
So far, he hasn’t been able to get the Monetary Fund fill in the blank, even though the agency admitted that the dollar hole was a product of the historic drought and not from a mismanagement of the macroeconomy.
The Government still hopes that Biden will push the IMF to disburse funds for Argentina.
The minister, confide officials who were with him in the last hours, has the expectation that the government of Joe Biden will play decisively in favor of the IMF making a contribution of fresh funds to avoid the collapse of the economy. Massa expects the White House to send a decisive wink in the coming weeks.
Massa’s optimism is not shared by officials from the economic cabinet itself, who see the situation as very complicated, and not only because of the exchange rate scenario.
They refer to the political question, with a very weakened government and a fragmented opposition, without valid interlocutors to seal an agreement with a view to the electoral campaign and a possible transition in power. Today, the polls consider both the candidacy of Horacio Rodriguez Larreta and Patricia Bullrich to be possible, with the latter -in coordination with Mauricio Macri- flirting with Javier Milei.
The Milei effect and accelerated dollarization
Before the last weekend, a report from the consultancy 1816 alerted clients about the “milei effect” and the danger of dollarization.
The consultancy is led by former financiers of Banco Mariva, who know the movements of the City inside out. Its clients are bankers of the main institutions.
The report warned that dollarization under these conditions, With barely US$1.8 billion in net reserves at the Central Bank, the value of that dollar would be close to $10,000. Unless an eventual government of Javier Milei gets a whopping US$44.700 million so that the dollarization is done at $400.
Milei’s dollarization plan caused alarm among analysts.
Faced with this disruptive scenario, which the financiers see as possible due to the latest known surveys by different specialists, which give the libertarian as the most voted candidate in the upcoming Primary elections, an acceleration of dollarization is evident in the market.
It was what happened yesterday, and that determined the rise of the blue to $420 and to the financial dollars even above that value (counted with liquid at $425).
Brake on the dollar: new measures under evaluation?
Under the present conditions, the only instrument at hand that Economy has to appease a currency run is a rise in interest rates. Until the weekend, the BCRA board was speculating on the chance to leave the fixed term rate intact, which is at 113% effective per year.
However, the jump in the exchange rate -which was preceded by inflationary overheating, of 7.7% in March- does not leave much room for avoiding this measure, which will have an impact on the financing of companies and also on the monetary issue, for the performance of the Leliqs.
The worst that could happen in this context is that savers take the pesos out of the banks to become dollarized.
The other issue has to do with imports. The Government admits that the restriction results in more pressure on prices. But there are not many alternatives left when the reserves do not recover strongly even with the implementation of the “soybean dollar 3”.
Yesterday, for example, the cereal companies liquidated only US$35 million. A breach of the agreement signed only a few days ago? In the midst of the turbulence, this issue was reviewed last night in the official offices.
There is not too long to delay foreign exchange earnings if you want to avoid an even more explosive scenario of what already exists.
