Sergio Massa’s strategy to increase the BCRA’s international reserves: the loans that are coming

In the next few days, probably next week or at the latest before the end of December, the government will receive a loan from the Inter-American Development Bank (IDB) for a few u$s500 million to swell the reserves of the Central Bank (BCRA).

It deals with a line called PBL (Policy-Based Lending) by which the country that receives this type of credit must show a solid macroeconomic policy as determined by an evaluation made by IDB technicians.

This PBL line of credit is not tied to the construction of an infrastructure work like investment credits and can be added to the country’s resources immediately.

Therefore, could be added to the total international reserves of the BCRA that currently reach 36,600 million dollars.

It should be noted that this year the IDB approved a total of 1,745 million dollars in credits and the year would end with a total of 2,370 million dollars. Argentina has credits with the organism for a total of 12,800 million dollars.

In the case of the loan that the IDB board of directors would approve next week, the agency explained that “these loans will provide liquid flexible financing to countries that request it to support political reforms and/or institutional changes in a specific sector or subsector and these loans have a limit of 30 percent of the bank’s total loans.


Massa will travel to Washington to try to close the third review of the agreement with the IMF staff

Add the most dollars

The strategy of the economic team is to add the largest amount of dollars to the international reserves of the BCRA.

Massa will probably travel to Washington in the last days of this month to try to close with the IMF staff the third review of the agreement that includes compliance with the quantitative macroeconomic goals for the July-September quarter.

In the economic team they believe that there will be no problems and that the IMF will approve this third review.

Massa’s big bet is to achieve the approval of the goals for the third quarter before the end of December. In particular, the position of net reserves to be able to receive before the end of December some 6.2 billion dollars corresponding to the IMF disbursements to repay December maturities.

The novelty that was known this week is that the IMF could ease the annual goal of net reserves for the second time.

At this point, it should be noted that it already reduced the target by 800 million dollars, going from 5,800 to 5,000 million dollars at the end of December due to a combination of greater restrictions on imports (a fact that is currently observed as a result of the change in SIMI to the SIRA) added to some foreign exchange creativity such as the soybean dollar.


The government will receive a loan from the Inter-American Development Bank (IDB) for about US$500 million

Alternatives to increase international reserves

In this regard, one of the biggest questions for local analysts and Wall Street is related to the compliance with the net international reserves that Argentina has to show at the end of December.

In relation to the total net reserves that the BCRA could show at the end of December, local financial market analysts see two alternative possibilities.

The first is that the BCRA adds to the liquid reserves part of the disbursements for some 6,200 million dollars that it will receive from the IMF and then pay the maturities in January 2023.

The second is a riskier option. It is related to the swap with China that the BCRA counts as part of its total international reserves for some 18,000 million dollars and of which it could count some 5,000 million of that total as unrestricted reserves.

From the economic team of Sergio Massa’s minister, they explain that the most substantial change is that the swap with China releases some 5 billion freely available international reserves so that the BCRA can use them for commercial operations in the free exchange market.

For this reason, that part of the swap could be accounted for as liquid reserves. So the BCRA could show, if the operation is carried out before the end of the year, a total of liquid reserves much higher than what it needs to show to the IMF authorities to meet the goals of the last quarter of the year. It remains to be seen if it will be able to close with a primary fiscal deficit of 2.5% of GDP since this year with the emission and inflation targets, the IMF staff will be very lax and contemplative.


Massa will have to negotiate with a new director of the IMF who will replace the previous director for the Western Hemisphere

Change of authorities in the IMF: impact

The novelty is that Massa and his economic team will have to negotiate with a new director of the IMF who will replace the previous director for the Western Hemisphere, the Brazilian Illan Goldfajn, who was in charge of monitoring the Argentine case.

After the latter’s election as the new president of the Inter-American Development Bank (IDB) in replacement of Mauricio Claver Carone, the Minister of Economy Sergio Massa and his economic team hope to know who will replace Goldfajn in the strategic direction of the Western Hemisphere of the organization that is in charge of monitoring the new agreement signed with Argentina.

The departure of the Brazilian, although it was expected, because I had already requested a license since October 24 past raises a big question mark as to who will be the IMF’s new interlocutor with the Argentine authorities.

From what iProfessional could know successor decision rests with Managing Director Kristalina Giorgieva. On Wall Street and in the corridors of the IMF, two career men are mentioned, such as Nigel Chalk, a hardliner within the organization, who did not agree to renegotiate the agreement signed by the government of Mauricio Macri. The other candidate is Luis Cubedu, a Venezuelan who has a very good relationship with the economic team.

But the truth is that the list of candidates must go through a kind of examination with Giorgieva and other filters from the organization’s human resources management.

Also, the IMF, according to what the statute indicates, could publish a notice in different media to fill that vacancy. This did not happen in the case of Golfanj, who came directly as a replacement for the Chilean Alejandro Werner, who had to leave his post because he was blamed for not handling the Argentine case well in the previous government.


The Government has already collected part of the withholdings on wheat exports from exporters in advance

Build a financial mattress

Massa’s move would be to go ahead and achieve, by the end of the year, that the liquid reserves increase by some 10,000 million dollars in an optimistic scenario or some 5,000 million dollars in a pessimistic scenario.

The reason: to put together a kind of financial cushion for the dollars that would be lost this year and next due to the drop in agricultural exports as a result of the drought and a greater demand for dollars from the import sector. The latest version is that there could be a reduction in taxes for the sector if it will use its own dollars in the future to pay for its imports.

This climatic phenomenon would cause a drop in agricultural exports which in turn could generate a drop in the liquid reserves of the BCRA. If we add to all this an abundance of pesos due to the strong issuance of the BCRA, the result could be much higher inflation than the current one in the coming months.

For the government, the situation is complicated because it has already collected part of the withholdings on wheat exports from exporters in advance. But the problem is not only the fall in wheat exports, but also the lack of wheat could impact a rise in flour prices that analysts did not expect for this last part of the year and that could have a very strong impact on inflation. in December and January of next year.

According to the data of the economist Ricardo Arriazu, the drought would generate a great loss of dollars for Argentina. “If the drought were similar to that of 2008, grain exports would drop some 8,000 million dollars,” explained Arriazu.

While the expert Salvador Di Stefano explained to Iprofesional that more than 10,000 million dollars of exports would be lost and the case is more serious than the 2008 drought because this is the third drought in three consecutive years and it will greatly affect the wheat harvest, which according to the estimates of the specialist will go from a crop of about 23 million tons last year to about 13 million tons this year and for that alone some 3,000 million dollars would be lost.

Di Stefano explained to iProfessional that “the current wheat campaign is not going to give the BCRA the dollars it needs to go through the summer calmly and as far as corn and soybeans are concerned, there was very little first-class planting and the sale of of soybeans and late corn could be delayed if the rains do not arrive quickly”. This could result in a rise in the costs of the agricultural sector and could also have an impact on inflation in the coming months, which could hinder the price agreements that the government seeks to try to reduce inflation.

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