For a week now, the rumor linked to the proposal made by the board of the Central Bank (BCRA) about the implementation of a possible saving measure to the local context devoid of foreign currency: the exchange rate unfolding. As commented in the City, the proposal would be promoted by the same Government, although from within the monetary authority, Miguel Pesce contradicts it.
For his part, the rate of deaccumulation of hard currency is expanding more and more, throughout the past week it had a drain of more than US$588 million, the worst balance in four and a half months. Which erases all memory of the conquests, in terms of collection, reached during the periods of the successful “soybean dollar” in its two versions. On the contrary, a field affected by a historic drought drastically complicates the entry of US currency into the country.
A relief for the local exchange sphere was known this week, when it was notified that during the next weeks, US$2,000 million dollars of free availability of the swap con China, in addition to the $1 billion that was made available last Monday. This income is highly relevant for the monetary climate, especially for the short term, since it could bring the BCRA closer to the reserve fulfillment goal scheduled by the IMF for the end of March, which to date still seems a long way off.
Other favorable disbursements for Argentina occurred at the beginning of the week when the Andean Development Corporation (CAF) contributed US$285.4 million and the Central American Bank for Economic Integration (CABEI) transferred US$395 million as a result of the granting of negotiated credits in the management of Massa.
What is exchange rate doubling
Alfredo Gutiérrez Girault, Head Professor Economic Policy Consultation Argentina of UADE asserts to iProfessional that al exchange rate splitting it is used by governments in times of shortage of reserves or difficulties in the current account, when there is excess demand for foreign currency. It consists, according to his words, of setting two differential values in dollars and establishing what type of operations will be carried out in each of the markets.
“For example, you can separate commercial and financial segments. In general, in the first, imports of real goods and services are incorporated with exports; while the financial market includes capital movements and debt interest and dividend payments,” said the macroeconomics expert.
The doubling would imply a greater fragmentation of the exchange market.
Regarding the operation of this measure, Gutiérrez highlights that the role of the BCRA in the midst of a split is to continue buying and selling dollars in the commercial and financial markets. However, in the latter, you can make it float freely for the entire duration or only initially until it reaches an apparent balance.
“The Argentine experience shows that we have done both and, obviously, the procedure will depend on the level of reserves with which execution begins.“adds the specialist.
In addition, it stands out that the doubling allows mixing, encouraging some type of exports or discouraging some type of imports. For example, with soybeans, 70% can be liquidated by commercial and 30% by financial, and in this way an incentive is given to the field sector. Or you can also do it in luxury consumer goods, assigning a liquidation of 50% for both markets. In this way, it is “devalued without devaluing”.
Previous experiences of the doubling of the dollar
In the last 80 years, Argentina has had a long experience of exchange control and doubling regimes. In the previous 60 years there was a monetary context with such a characteristic, so it has been present in the overwhelming majority of years.
In this regard, Federico Dominguez, financier and author of the book Argentina Hyperacelerada, comments to iProfessional that the exchange rate splits are measures with which our country has already experimented in the past without success. Among the years in which its poor implementations stand out are 1971 and its repetition in 1987; that ended with great economic and social crises such as the Rodrigazo, in the first; and hyperinflation, in the second.
Is the exchange rate split the solution?
The renowned economist Alfredo Gutiérrez Girault mentions to iProfessional that the split does not imply that there are no restrictions on access to the exchange marketwhich could generate a triple market made up of authorized commercial and financial operations that can be carried out and others of this type that are left out, as usually happens with tourism, where the BCRA intervenes in finance. “The key question is how many reserves are allowed to play in each market and if when you release it you are going to make a dirty float with sporadic interventions,” said the honorary member of the UADE Council.
The reserve crisis, a motivating factor for a possible exchange rate unfolding.
It also recognizes that none of these mechanisms solves the problems of the BCRA related to the shortage of reserves, within a context that has thrown away all accumulation forecasts for 2023 after the drought. He adds that, with respect to the oilseed, a production of 45 million tons was expected in November and now we are at estimates of 27 million.
Aligned with these perspectives, Domínguez points out that exchange rate differentiation does not solve the core of the problem, and fuels inflationary pressure after excessive issuance both to finance the fiscal deficit and to pay the interest on the Leliqs.
“The underlying response to this agony over reserves is the exchange unificationwith a single reference rate for both foreign trade and financial operations,” warns the analyst.
