On the foreign exchange side, the beginning of October showed an even greater slowdown in the rate of crawling peg (managed slippage of the exchange rate). In the first fortnight of the month, central bank it validated an advance of the wholesale dollar of 44 cents or 0.45%. An increase even more limited than that of the same period of September (0.52%) and August (0.5%).
This shows the continuity of the exchange rate anchor. This is a bet that the Government has deployed since the beginning of the year (in the first nine months the CPI rose 37% and the official exchange rate, 17.3%) and that it defined to sustain.
Some sources in the economic cabinet consider that this contributed to the slow monthly deceleration of inflation from 4.8% in March to 2.5% in August and that the September peak was expected mainly due to seasonal reasons.
Using the same logic, the BCRA’s monetary policy rate will remain at the same level it reached in November 2020. They expect inflation to resume the path of a slow monthly slowdown.
In any case, it will be the yield of the securities placed by the Ministry of Finance that could move according to the dynamics of the market, as happened in the weeks before and after PASO, to try to capture more net debt and limit the rate of expansion of the monetary financing of the deficit, which in the year represents 70% of the funding sources of the Treasury (above the 60% budgeted). Meanwhile, the absorption of the bulk of the liquidity injected through the placement of Pases and Leliq to banks will continue.
The truth is that Feletti acknowledged that the data collected during the first days of October showed that the acceleration continued. This prompted the search for an agreement with the firms producing essential goods and marketing to freeze the price of some 1,200 items for 90 days.
Today the secretary will analyze the lists in a new meeting with supermarkets and food providers, and warned that he will apply the Supply Law if there is no agreement. It occurs in the midst of a rapprochement between the Government and the business leadership, which included a meeting between Alberto Fernández and prominent figures of the local establishment, the participation of the President in the closing of the IDEA colloquium and the call of the main legs of the ruling party to a social agreement after the legislative ones.
Controls over the dollar and IMF
Due to the scarce international reserves, a large part of the market does not believe that the current rate of the dollar’s slide will be sustained beyond the elections and for this reason it is betting to hedge itself (through dollar linked bonds and future dollar contracts) from a possible devaluation jump or strong acceleration of the crawling peg. This week, in an intervention he recorded for IDEA before flying to the United States, Martín Guzmán once again ruled out that scenario. Official sources reaffirm that the path for the exchange rate with the dollar is in the Budget and that there is no idea to modify it: $ 102.40 average in December 2021 and $ 131.10 by the end of next year, according to the project for Exercise 2022 .
To sustain the exchange rate anchor in the short term, the Central valued the respite brought by the latest restrictions imposed during October on the advance payment of imports, which were announced on Tuesday 5. After selling US $ 219 million in the first three wheels of the month, after the measure, net purchases for more than US $ 500 million were linked in the following six days. Thus, the monthly balance accumulated in the intervention in the official market is positive at US $ 316 million, something atypical for a month of unfavorable seasonality. In the second fortnight, net sales could be seen again.
In this context, Miguel Pesce returned from his trip to Washington on Friday, where he participated with Guzmán and other officials in the negotiation meetings of the new program with the Fund. He did not accompany the minister to New York, who along with Juan Manzur met investors and large Wall Street funds.
The president of the Central Bank reconfirmed that the body validates a continuity of exchange controls: the Fund asks to accumulate reserves and, if the stocks were lifted, the flight and the demand for hoarding would soar, explained sources familiar with the dialogue. There will be a trap for the formation of external assets for a long time.
Yes, it will aim to gradually make access to foreign currency more flexible so that companies that invest can turn dividends and import, in line with the decree for large investments and some sectorial bills presented in recent times that also pursue the objective of increase the level of exports.
In the same train of increasing the reserves, is that -if an agreement is sealed- the IMF would send Argentina the special drawing rights (SDR) that the Government decided to use this year to pay the first two capital maturities for about US $ 3.8 billion corresponding to the multi-million dollar loan that Mauricio Macri contracted in 2018, as this newspaper announced. It was what the President transmitted to the businessmen with whom he had lunch on Tuesday.
Meanwhile, last week, in technical meetings with the Fund’s staff, the discussion on the goals of the future program continued, with a focus on the external front and on fiscal and monetary policy. The IMF, in addition to cutting the fiscal deficit, demands a reduction in the portion of the red covered with monetary issue during the transition to equilibrium and its replacement by debt in pesos.
Although it is going through difficulties to meet its financial guidelines, it is something that Guzmán shares since he considers that a greater printing of pesos would further heighten the pressures on the exchange gap. The discussion, in both cases, goes through speed. Sources with knowledge of the conversations told Ambit The deficit targets, how financing is measured, and the different funding sources were discussed in detail.
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