In the midst of the tense calm that the exchange market is experiencing, the price of the dollar is beginning to weigh on various aspects that are linked to the low income of foreign currency and the political noises that are amplified by an electoral year that has just begun. In this frame, the Government must validate a much higher price than the one indicated on the blackboards to buy US bills.
In fact, the few reserves that the Central Bank managed to accumulate in recent months were thanks to disbursements made by the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB).
And several of the North American currency entries were leveraged by transitory “soy dollar” schemes, that “they are nothing more than a disguised devaluation, where both the market and the government come together, thus marking a sort of equilibrium exchange rate,” indicates the LCG consultantfounded by Martin Lousteau.
For these economists, at that special price that is higher than the one marked on the banks’ blackboards, “there are sales, dollars abound, and only at that price the Central Bank buys reserves. Meanwhile, the months in the absence of this exchange regime, the balances of international reserves were negative”.
Thus, from LCG they maintain that these official incentives are reflected in the implicit exchange rate paid by the BCRA in December.
“Taking the total dollars purchased and retained with respect to the total pesos delivered to the market, the cost of acquiring foreign currency averaged $243”detail.
That is, a price that far exceeds the official exchange ratewhich currently stands at $180, and the “soybean dollar”, for which the authorities validated offering agricultural producers the value of $230.
In order to buy dollars, according to the LCG consultancy, the Central Bank had to validate a final price of $243.
Dollar price and emerging backgrounds
For the LCG economists, the value higher than that of the official place that the Central Bank had to validate to acquire foreign currency, “crystallizes the imbalances that accumulate on the exchange front”.
Regarding the behavior that the free dollar may have, for these experts, although an overheating has been seen by the end of 2022, “the free dollar may operate moderately calm in the summer months due to a higher seasonal demand for pesos and temporarily lower inflationmaking term placements somewhat more attractive”.
However, be aware that this is “ephemeral successes of the Government, In any case, they can be useful to stabilize the nominal rate at around 5% per month. A still high value.”
However, they complete that “the risks do not dissipate”, since they indicate that, once again, the same error is repeated as in 2016.
“The starting point is not the right one, where misaligned relative prices are observed, so regulated price adjustments (already scheduled) will have to be made, which will threaten to fuel inflation again; thus shortening the window of opportunity that the Government has until March, when the demand for money seasonally falls again,” they maintain from LCG.
In summary, the unknown for economists is located on What position will the Central Bank take regarding the rate of devaluation?.
Beyond the current price of the dollar and the pressure of inflation, for economists the confidence generated by the Government is essential.
Factors to be taken into account by economists
From the perspective of analysts, the aspect that they glimpse among so many undefined factors is that there is a “need” for announcements of clear rules.
“Perhaps he is too optimistic on this point, in reference to the effective potential that it can have on the economy, but it is precisely what would allow a smooth transition from a disorderly economy to a proactive one in the sense of correct existing imbalances“, they maintain from LCG.
Consequently, they emphasize that calm could be brought to the “bulging” local debt market, where only 65% agreed to exchange and postpone the maturities of their holdings, increasing the maturity profile from $4 trillion to $6 trillion for the pre-election months of April, May and june.
