The sharp drop in international reserves Central Bank Grosstogether with the low liquidation of dollars by the industrial agro-export sector and the explosive increase in the BCRA’s monetary liabilities due to a large issue of pesos, is a combo that will probably generate great pressure on the price of the blue dollar and the rates financial exchange rates and an increase in the exchange rate gap between now and the presidential PASO on August 13.
The value of Dolar blue It increased 35% up to April, the remunerated liabilities of the BCRA grow at a rate of 32%, the MEP dollar in the same period increased 33.0% and inflation in 4 months would reach 31.5%.
In this regard, a recent work by the specialist Salvador DiStefano highlights the following:
- There is a sharp drop in gross international reserves that fell by US$ 9,596 million in 4 months of 2023 while BCRA monetary liabilities grew by $3.5 trillion pesos.
- The ratio of liabilities versus reserves went from an average dollar of $352 to $547, which represents a rise of 55.5%, in the same period of time the MEP dollar rose 33.0%.
- The blue dollar as of December 2022 closed at $348, and on April 28 it closed at $472, with which it rose 35.6% in the year and would give the impression that the blue dollar better reflects the ratio of liabilities versus BCRA reserves . The estimated inflation for the first 4 months of the year, projecting a monthly inflation of 8.0% for April, would reach 31.5%.
- It is very likely that the blue dollar or MEP will trade above $500 very soon, unless the IMF disbursement arrives and the scenario has to be recalculated, of course with a momentarily lower dollar.
What will happen in the future with the price of the dollar
in relation to future value of the dollar, The latest report from the consulting firm Invecq highlights that: “the price of alternative dollars skyrocketed at a worrying speed at the end of April. However, this week the waters calmed down a bit: the price of blue and Cash with Settlement (CCL) closed at $477 and $433 (GD30) -respectively-, after reaching peaks of $495 and $459 just a few days ago. For its part, the exchange rate gap remained stable at around 110% -in the case of blue– and 90% -in relation to the CCL”.
The report states that: “the bullfight had begun to subside towards the end of the last week behind the BCRA rate hike, the strong intervention in the secondary market by public bodies, and the acceleration in the crawling-peg rhythm, validating a higher nominal value; which, added to exchange rate volatility, will undoubtedly translate into a rise in domestic prices”.
Explosive cocktail: fall in reserves, worrisome drop in deposits and sharp rise in BCRA liabilities
It should be noted that also added the General Resolution 959/2023 published by the National Securities Commission (CNV), which introduced new limits in the operation of financial dollars since May 2: those who maintain taking positions in sureties and/or repos may not carry out sales operations with settlement in foreign currency -either MEP or CCL-.
In this way, the Government seeks restrict the volume of titles traded in this segmentand therefore have greater firepower in their interventions.
Reserves in critical situation
The situation regarding net international reserves continues to be extremely worrying, and none of the fundamentals macro ensures that relative stability persists over time.
“In fact, this week the net reserves – under the IMF methodology – entered negative territory and already exceeded 1,000 million dollars, turning on yellow lights for what is to come,” adds the report from the consultancy.
On Friday, when reaching around 34,000 million dollars, the gross international reserves of the BCRA showed a drop of about 10.5 billion dollars at the end of last year.
This fall of the gross international reserves both in absolute and relative terms, it is unprecedented for a one-year start-up and is above the low that occurred between January and early May 2001, which reached about $7.2 billion.
The situation in terms of net international reserves continues to be extremely worrisome
The impact of the soybean dollar on reserves
The most worrying thing is that some 3,200 million dollars sold were lost due to foreign exchange market interventions to stop the rise of alternative financial dollars. So far in May and despite the liquidation of the new agricultural dollar, the BCRA already has net sales of some 280 million dollars.
If compared to previous editions, the BCRA was able to buy -net- only US$279 M since the implementation of the new dollar spreadwhile in the first two editions of the program by this time it had bought US$4.287 M and US$1.195 M, respectively.
According to the latest report from the Center for Southern Economic Studies (CESUR) with the soybean dollar September of 200 pesos, the BCRA kept 65% of the dollars liquidated by the agro-industrial export sector, with the dollar 2.0 of 230 pesos last December, the BCRA captured 70% of the total dollars liquidated by the exporters while With the agricultural dollar, for now, it only remained at 15% of the total liquidated.
These international reserves showed a high level for December, due to the fact that the government encouraged the liquidation through the soybean dollar of 200 pesos and the 2.0 dollar of 230 pesos. This generated an early liquidation of dollars from the industrial agro-export sector that raised these net international reserves (RIN) artificially and allowed the government to close the goals of the last quarter of the year with the IMF.
The dollars that the BCRA will not be able to buy
These previews of dollar liquidations of last year will cause the BCRA to not be able to buy those dollars this year since it bought them in advance last year and leaves the BCRA with a reduced possibility of income of dollars in the year 2023.
To which is added a lower liquidation of the agro-export sector As a consequence of the drought, grain exports will be reduced by about 15,000 million dollars this year, something that will be difficult to reverse as a result of the dismal agricultural campaign that is taking place.
There was less liquidation of the agro-export sector as a consequence of the drought
In April, according to CIARA-SEC data, the cereal-oleaginous agro-industrial sector It liquidated some 2,435 million dollars compared to some 3,171 million in April last year, which implies 23% less.
On the other hand, the increase in rate of inflation 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.
Why the field liquidated few dollars
The meager field liquidation It is explained by several factors: the impact of the drought, the skyrocketing of alternative dollars, and a price of 300 pesos per dollar that does not look tempting for the producer. Encouragingly last week the average settlement of the agro dollar It increased, but as the days go by, the scheme loses its attractiveness because the difference between the official dollar and the alternative financial dollars is reduced.
The other aspect that could generate a greater drop in gross international reserves until the PASO of August 13 is a drop in dollar deposits due to increased uncertainty among economic agents.
Regarding these deposits, the drop in the first four months is about 1,500 dollars, of which 1,000 million left in April, which reveals that in the midst of the last currency run a flight of deposits from banking entities began. Dollar deposits fell from nearly 16.4 billion on March 20 to just under 15.3 billion at the end of April, a 6.7% decline, according to the latest data released last Friday. Forward prospects do not look very favourable, since the drought will continue to hit the supply of dollars.
For this reason, the government will seek to obtain financing from international organizations via loans, use the swap with China for bilateral trade, try to implement a similar mechanism with Brazil and also have the IMF advance the disbursements that remain for the rest of the year for some 10.8 billion dollars.
