Despite the agreement and a giant debt swap that the Government carried out to alleviate short-term maturities, the doubts of investors were not appeased in the face of rising inflation, high fiscal deficit and scarce international reserves, in the midst of a complex year in which presidential elections will be held.
“Obviously the drought is a very valid justification for adjusting the reserve accumulation goals. It is not a simple thing because the agreement with the Fund is really the only anchor we have and the anchor works to the extent that it is credible,” he said in radio statements Héctor Torres, former Argentine representative at the IMF.
“It is not so easy to say that I change the goals and nothing else. We obviously have a fiscal problem. Without fiscal consolidation, we also have an exchange rate adjustment problem that is clear. Changing the goals alone could raise questions about the credibility of the anchor“, he claimed.
“The result of the swap (debt) was 57.7% acceptance, below expectations since 50% is the participation of state entities and there was little private participation,” said Priscila Bruno from Rava Bursátil. “The clearing of maturities for the next three and a half months reduces the risk of spiraling. Having to face a less demanding profile mitigates -but does not eliminate- the probability that the BCRA will have to monetize part of the maturities in the event that the ‘rollover’ is truncated”, indicated GMA Capital Research, although it indicated that “drought and adverse external winds appear to be jeopardizing ‘carry trade’ strategies”.
“Exporters have entered 309 million dollars so far in March (as of Friday 10), which represents a 76% drop compared to the first seven rounds of March 2022,” said analyst Salvador Vitelli, noting that “the daily liquidation average amounts to 44 million dollars, 50% less than the historical average and 67% below 2022″.
“According to the latest projections, the drought would have a direct impact of 3% of GDP, costing around 19,000 million dollars. This will lead to less exports and more (exchange) stocks, which will have another negative effect on the level of activity and inflation,” recalled Fundcorp’s Roberto Geretto.
“The already difficult election year is going to be even more difficult,” he claimed.
“The government gave in almost everything to get through the year without financial storms; the main reason is not taking care of the need to balance budget accounts and a devaluation due to its inflationary and social consequences,” estimated VatNet Financial Research, and narrowed that “the fiscal situation is difficult to sustain and the high and prolonged exchange rate gap has given rise to all kinds of distortions.”
“The end of the La Niña (climate) phenomenon and the recovery of the rains in a few months brings good news thinking about 2024. The new government would face an offer of 20,000 million dollars higher than 2023which would support the progressive normalization of public accounts and exchange restrictions,” estimated Delphos Investment.
Drought.jpg
“The BCRA continues to lose foreign currency and the supply of the agro-industrial sector is reduced to a minimum. During the week the BCRA had to face sales for 282.5 million dollars,” recalled the Eco Go consultancy, noting that “in addition, nervousness and a The international situation was not a support for the financial exchange rates either, which jumped around 5.8% during the week, taking the gap to 96.3%”.
“When making a decision on monetary policy, the BCRA would seem to prioritize core inflation dynamics over general inflation, seeking to isolate any type of impact caused by a seasonal rise, a transitory shock or a political decision regarding regulated prices,” said Ecolatina.
He added that “If inflation accelerates, the current set of economic policy would find itself facing a new round of pressure: if the government’s response were to speed up the rate of devaluation, it would feed back the price dynamics and the scenario would gain instability; but, on the other hand, validating a greater exchange rate delay would make it even more difficult to defend the official parity and would jeopardize the need to accumulate reserves”.
“Due to the restrictions on the import of inputs and the uncertainty of the macro-political situation that threatens investment projects (in the industry), it is considered that the current level could be a ceiling, and that the industry would present only marginal advances in the first months of 2023”, estimated the consulting firm Invecq.
“Not only does the drop in sales hit us because the purchasing power of our customers is reduced, but also the macroeconomic uncertainty that is generated and that hits squarely in the day-to-day of our companies, which we know well that we are not the ones who form the price,” said Alfredo González, president of the Argentine Confederation of Medium Enterprises (CAME), in radio statements.
“It is not that those who form the price are to blame, but the macroeconomic situation and this inflationary process that unfortunately has grown again in the last two months”he claimed.
“The delay in the import system, the tax burden and the exchange market are the three issues that most concern SMEs that are part of the productive system of our country today,” said Alfredo Bonazzi, president of the Argentine Chamber. Machine Tool (CARMAHE), adding that “the scenario of constant uncertainty threatens the possibility of making decisions”.
Source: Ambito
