Everyone talks about the price of the blue dollar, but in reality the real issue that worries the officials of the economic team is the gap between parallel and official. Two problems that seem the same but are not: if the blue advances at the same speed as the “crawling peg” of the official dollar, then the macroeconomic effect is almost neutral. On the other hand, if what happened in the last days is when the crisis is imminent.
In April, the blue advanced 26%, while the wholesale dollar -the one set by the Central Bank and governs foreign trade- barely moved 5.67% and the official dollar that is handled in exchanges rose just 4 .94%
That is the difference that is at the heart of the distortions in the economy, and it is what ended up strangling the reserve position of the Central Bank, because it ruins the expected effect of the new “agro dollar”.
This occurs because the soybean producer’s perception of whether it is a good or bad time to sell depends on the gap, much more than on the international market price or the exchange rate offered as an incentive.
And in recent weeks, producers have seen their accounts deteriorate every day. When the “agricultural dollar” was recently announced, the expectation was that 51% of the international price of soybeans could be received, instead of the 35% that had been charged until then.
But with the widening of the gap, that advantage has been cut notably, to the point that today it stands at 44% and with prospects that it will continue to fall at an accelerated rate.
One of the most direct impacts of the exchange rate gap is seen in the liquidation of soybeans, since it alters the business equation for producers
The soybean calculator
The account was as follows: at that time the price of soybeans in the Chicago market was US$553, from which must be subtracted the 33% that the AFIP retains for withholdings. There were US$370 left, which were settled at the official exchange rate -then at $209-, which implied that this amount was exchanged for $77,436. And, since the soy farmer needs foreign currency to meet his costs, he resorted to the conversion of those pesos in the MEP -which today trades at $396-, with which in the market he obtained US$195. In other words, 35% of the international value.
With Sergio Massa’s proposal that recognized an exchange rate of $300, the account changed, because, once the withholdings were discounted, the producer received $111,150 from the Central Bank, which in turn, in the financial market, becomes US$281. . This means 51% of the value of soybeans in the international market.
Even with that improvement, the system had Obvious problems from the startdue to the divergence of expectations among exporters, who viewed with concern a downward trend in international prices, and the producerswho felt that the internal price they received would not be enough to offset the costs.
And the dollar crisis played a fundamental role in recent days to decree the failure of the “agricultural dollar.” Because now the account has changed radically, since the gap between the exchange rate of $300 that soybeans receive and the price at which they must convert their pesos has increased substantially.
To put it in figures, if the same prices in the Chicago market as a month ago were maintained, soybeans would receive $111,150 for each ton exported, which they should now convert to a MEP that rose 13% and is trading at $449. And they get the unpleasant surprise that they can convert their pesos in u$s247, instead of the u$s281 that i had originally planned.
In other words, due to the effect of widening the gap, they no longer keep 51% of the international soybean price, but only 44%, and that percentage is decreasing day by day.
To topthe price has been decreasing in the international marketto the point that today it is trading at US$22 lower than when the “agro dollar” was devised, which increases the incentive to retain the bean in the silobags and wait for a more propitious moment for sale.
The gap threatens the liquidation of soybeans
As a small consolation for Massa, the situation is not as bad as it could have been, since the MEP dollar -which is relevant for the calculation made by agricultural producers- has not run at the same rate as the blue dollar.
So far this month, that is, since the “agro dollar” came into force, the blue rose an impressive 26% while the MEP moved “barely” 13% against an official dollar that is still far behind at 5%.
Sergio Massa, under pressure from the market and the IMF to take a drastic exchange measure, encourages an acceleration of the “crawling peg”
It is clear that if the MEP had run at the same speed as the blue, today the “agro dollar” would find itself in a much more serious situation. With the current situation, The expectation that is handled in the field is that the export incentive program produces a liquidation of US$2,500 millionhalf of what had originally been raised.
And the key to everything is that the attractiveness of the export incentive plan was the reduction, in fact, of the exchange rate gap, which would drop from 89% to 35%. Today, if blue is taken as a reference, that gap was again 65%. And if the MEP is taken, it is 50%.
For the original appeal of the “agro dollar” to be maintained, something drastic from a political point of view would have to happen: Massa would bring the exchange rate to $340. It does not seem like a measure that could have a consensus within the government coalition, although it is also true that in recent hours all kinds of speculations have been heard regarding possible exchange measures.
Does the gap have a “natural ceiling”?
With such a picture, there is a question that is repeated daily in the financial city, on social networks, in the countryside and in the government offices themselves: When does the parallel dollar stop, where is the point from which it finds a new equilibrium level?
It is a difficult question to answer, because many factors are involved, and not all of them are of a technical nature, but political arguments weigh heavily.
But there are economists who propose models that have already been tested in the past: for example, there are those who argue that there would be a “natural ceiling” of the gap that would be located at 120%. The argument is that when that difference between the blue and the official exchange rate occurs, operators appear who are tempted by the high price and go out to sell. In this way, the offer is recomposed -which is what has disappeared in recent days- and the situation begins to stabilize.
It is a theory that will enter its acid test in the coming days, given that if the premise were correct, then with the current prices a correction would have to begin to be seen, given that on Tuesday it closed with a gap of 118% between the blue and the official price of Banco Nación.
In recent days, the Central Bank increased the daily microdevaluation rate, a message to the market about its willingness to reduce the gap with the blue
The truth is that recent history has also shown that when panic grips the market, there is no technical analysis that will hold up, and the ends of the gap can stretch much further. The clearest example is July of last year, during the interim of Silvina Batakis at the Ministry of Economy, when the blue priced at $340. At the time, that implied a gap of 160%.
That’s why many economists have warned that as high as it may seem, today’s blue dollar still looks low compared to times of recent financial turmoil. For example, that peak that occurred in July of last year would be equivalent today to a blue dollar of $576, according to an estimate by the economist Salvador Vitelli.
The bet to accelerate the “crawling peg”
Today no one dares to deny that the parallel can continue its upward career until it reaches that level in a few days. And the first to take this possibility seriously are the officials, to such an extent that today a change in the policy of daily micro devaluations is being implemented.
Since the currency crisis worsened, the Central Bank accelerated the crawling peg, to the point that if projected at an annual rate it would be close to 9%. Quite a difference with respect to the policy that had been maintained in recent months, without going any further in March the official dollar barely moved 6% against inflation of 7%.
This acceleration in the daily devaluation rate of the official exchange rate is a strong signal to the International Monetary Fund, who had been warning about the loss of competitiveness of the Argentine economy, for maintaining a “crawling peg” always below the CPI.
In its latest report, the Fund calculated that the peso is overvalued by up to 25%. Which, in other words, means that for the agency’s technical staff, today the official exchange rate should be at $275.
The Government flatly resists a sudden devaluation jump, for economic and political reasons. Among the former, the argument stands out that any devaluation is followed by inflationary contagion to the rest of the prices. And among the political arguments, the rule naturally prevails that any government that devalues an electoral defeat is assured.
However, there is a general acceptance that with this level of exchange rate gap, some measure must be taken to mitigate the situation. A crawling peg acceleration works like a signal to the marketand officials are hopeful that this is the measure that prevents the devaluation jump.
For now, the market is showing no sign of sharing that view.
