The blue dollar fell $3 this Wednesday and closed at $391, while the financial dollars that are traded in the stock market –counted with liquidation y MEP– They operated with great volatility and ended slightly lower in what was the first reaction to the measures of the Ministry of Economy seeking to keep the prices of these currencies under control.
The Government announced that it will provide via DNU that all national public entities deliver their bond holdings in dollars in exchange under foreign law (Global) for titles in pesos, calculating that the total amount of the operation will be US$4,000 million. Simultaneously, public agencies must sell the bonds in dollars under local legislation (Bonars) through bidding. Together, those bonds add up to about $35 billion.
The measures are adopted after the recent escalation of financial dollars, especially the CCL, which last week crossed the $400 barrier, in a scenario of a shortage of dollars due to the impact of the drought and the bleeding of foreign currency by the BCRA due to the daily sales in the official exchange market. Added to this framework is the fact that the IMF prohibited the use of reserves to intervene in the price of the CCL and MEP in the last review of the agreement.
For analysts, the objective of the measures is get financing for the Treasuryalthough They doubt the impact it may have on financial dollars and estimate that it could only temporarily stop the pressure on the CCL and MEP, since the underlying problems are not resolved.
Bond swap: what is the objective of the measure?
A report from the consultant 1816 stated that “the main objective of the measures is get financing for the Treasury“, given that “local investors have been rejecting securities in pesos maturing in the next presidential term, while foreign investors reject securities in dollars.”
“With limits imposed by the organic charter of the BCRA and the IMF so that the BCRA finances the Treasury and with a drought that will reduce the collection of the State, what the Government will try now is to tempt local private companies to buy bonars in dollars, we assume than removing restrictions up to now in force”. And he asserted that “the government is looking for alternative ways to finance itself to avoid monetizing the entire deficit and spiraling inflation.”
Analysts doubt that the new measures will keep the CCL under control, which last week crossed the $400 barrier
of the same look, Nery Persichinia strategist at GMA Capital, pointed out that “the measure seems to aim to cover multiple objectives. The first and fundamental is to ensure financing in pesos from the Treasury for the rest of the year.”
“We estimate that the Bonares operation, excluding the holding of the BCRA, would have a market value of $1.5 trillion, almost one point of nominal GDP projected for 2023. It is an important value in light of the difficulties that the Government has to obtain genuine funding from the peso market. The lower-than-expected adherence in the last exchange was a sample,” he commented.
Persichini maintained that “the other implicit objective is to try to mitigate the movements of financial dollars”.
In tune, the analysts of Facimex Values considered that “the measure seems to pursue a double objective; on the one hand, it seeks new financing mechanisms to close this year’s financial program without failing to meet the IMF’s monetary goal, in a context in which investors continue to be reluctant to finance the presidential transition”; for another, “aims to contain the exchange gap by increasing the supply of instruments that allow channeling the dollarization of portfolios, even when they are imperfect substitutes for pure dollarization”.
At the same time, Juan Pablo Albornoz, Invecq’s economist, based on what has come out about the measures and waiting to know the fine print, also believes that “the background of the measure is to bring air to the financial program: if I force you to liquidate your position in bonars and then With those pesos you come to the tenders and you take debt in pesos I get financing; at the same time, I have bonds in my portfolio to go out and sell to the market and calm the gap”.
Financial dollars: will the measures succeed in keeping them contained?
The CCL traded on Wednesday with wide disparity. It was as low as $6 at the start of the round, but then cut back, eventually closing at $398.82, a slight drop of 0.6%. Meanwhile, the MEP advanced 0.3% and ended at $382.64.
The new measures come after the IMF prohibited the use of reserves to intervene in financial dollars
Andres Reschinian analyst at F2 Soluciones Financieros, judged that this measure “At best, it will only be able to stem the pressure on financial dollars for a short period of time.”
And he reasoned: “It does not serve to solve the shortage of dollars, that can only be solved with dollars. It is a measure that, deep down, forcibly places debt in pesos to public entities because the market cut off credit to the Treasury.”
With the same reading Fernando Baer, chief economist at Quantum Finance, stated: “I don’t think they can contain them, beyond specific situations that make it drop temporarily and then return to previous levels”.
“The financial and exchange situation is not altered by this. You continue without dollars and with excess pesos, in a context of lower demand for Treasury debt,” he alleged.
In addition, Peaches explained that “the sale of bonds in dollars has an exchange rate component and a parity component. The only way for the dollar to fall is if the parity does not go down in the face of an increase in the supply of securities (or the country risk does not go up ), and that did not happen this day, with the prices of the titles that sank 5%, while the market exchange rates fell slightly”.
For analysts of PPI, “the effect on financial dollars may be quite limited and transitory, at the cost of a considerable drop in the price of sovereign bonds”. In addition, they assessed that “it is a rather controversial measure because shows that the Government is willing to ‘undersell’ the bonds at low prices in exchange for a pause in the pressure of the titles”.
Analysts say that the measures do not solve the underlying problem, which is the shortage of dollars
Contrary to the declarations of the Vice Minister of the Economy, Gabriel Rubinstein, the financial analyst Franco Tealdi He said: “I don’t think these measures are going to stabilize the financial situation, the problem today is the real economy, the drought and the recession.”
In his opinion, these measures are “a desperate attempt to temporarily avoid a jump in the exchange rate, at the cost of a further weakening of public wealthsince you increase the public debt in dollars in the hands of a private sector”.
Financial dollars: how will they continue?
For her part, the economist Natalia Butterfly He assured that the measures “will serve to intervene in the financial markets but not to reverse the upward trend (of financial dollars)” and emphasized that “what they are doing is buying some time.”
“It may be that we will see a downward correction in the coming days, but it is very likely that they will push upwards again in a week. It does not only depend on local factors but also international ones. We are in a context where the value of the assets of emerging markets lose to safer assets There is a buoyant capital outflow that threatens to spread And in that context, the Government does nothing more than apply desperate patches. The market already discounts that the instruments are running out,” he stressed.
In turn, the consultant 1816 evaluated that “It is unclear that the measure will have an impact on financial dollars, basically because the government is not selling dollars with this operation (as it does when it buys bonds with currencies and then sells those bonds against pesos), but rather is selling Bonares in dollars on a net basis”.
“The clearest impact is on dollar bond parities. Given that dollar bonds are a very imperfect substitute – but a substitute nonetheless – for dollars, it could be assumed that some impact on the CCL could be there, but we are not very optimistic about it.”
Economists criticize that the bond swap will deteriorate the assets of Anses
the analyst Christian Bottlesr opined that “a strong offer of bonds in dollars to be sold in pesos in principle will keep financial exchange rates a little more controlled for a while, especially the MEP.”
“It is an operation that has many edges because on the other hand the quality of the assets that the ANSES will have decreases. It is not the same to have a bond that pays dollar bills than to have a bond that pays in pesos at the official dollar value,” she added.
the analyst Gustavo Ber foresees that “in a scenario of scarce reserves, clearly accentuated by the severe drought, the authorities could find that these new initiatives provide only temporary relief, by not attacking the serious economic imbalances to manage in this transition stage, although at the cost of extending interventions in the market, which generate distortions in valuations and a deterioration in confidence”.
for the economist Federico Glustein, “The liquidation by the Government of the bonds in dollars in the hands of State agencies will initially tend towards a drop in financial bonds with subsequent stabilization; that is, the CCL will remain somewhat below $400, but when shortly , dollars are required to pay for imports, will rise due to an increase in the demand for foreign currency”.
costly measure
Persichini assured that “the cost of this financial strategy is very high, it implies that the private sector will indirectly finance the Treasury with bonds that yield 50% in dollars through a privatization of public debt.” And he maintained that “simultaneously, the patrimonial quality of public entities, including the FGS and the retirement system, will deteriorate notoriously”.
At the same time, Bathrobe He stressed that “all this is at the cost of madness at the macro level: we went from repurchasing debt in (global) dollars to trying to get a REPO paying more than 35 cents per sheet to now being willing to resell that sovereign debt (Bonars) almost 10 cents less per sheet”.
For his part, Federico Moll, Ecolatina analyst, assured that “the Government, by forcing public bodies to sell the bonds it has, is doing nothing very indistinct to borrowing at a ridiculously high rate. It forces you to get rid of bonds at a market price that is very cheap and one can hypothesize that we are talking about the most expensive debt in Argentine history, also decapitalizing the pension system in the process. And, all this, to sustain the parallel prices for some time; that is, to gain time “. And he sentenced:” In the cost-benefit, it does not close too much “.
