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the causes of the drop and what to expect going forward

the causes of the drop and what to expect going forward

The gross reserves of the Central Bank (BCRA) fell $443 million this Monday and closed in US$37.157 million. Analysts in the City look at this trend with concern and analyze what elements affect this strong drop in a single day.

However, the economist Federico Glustein details that, this Monday, there was a strong impact on the drop in the price of gold and the yuan (which fell 1.1% and impacted the swap price), which would explain almost $70 million from the low, on the other hand, close to US$95 million correspond to sales that the Central carried out this Monday in the MULC and some US$55 million are for outflow of deposits.

“Meanwhile, the rest may correspond to disbursements for some special importGlustein clarifies. And he drives away, thus, any alert that may have been rumored today in the City of a possible run on deposits after the decision of former president Mauricio Macri to get out of the electoral race to go for a new term.

The net reserves of the BCRA, in fall

However, it is undeniable that, as pointed out by the director of MyR Consultores, the economist Fabio Rodríguez, “the dynamic already seems unsustainable” and warns that the BCRA balance reflects a strong existence of pesos, practically, without net international reserves to support them.

And it is that, according to his estimates, the net reserves, which are the ones that the BCRA has to react to complex situations, “they would barely be exceeding US$1,000 million”. It is not the first time that the Central is at these levels of net reserves, that is true, but the aggravating factor in this case for Rodríguez is the fact that “they have suffered a great fall in this quarter, since they were around US$9 billion in December 2022” (after the implementation of the soybean dollar 2).

One of the most worrying elements in this sense, for Rodríguez is the fact that the exchange risk perception growing worsened with the drought in the last two months and points out that it is very likely, in this context, that the economic team will not be able to comply with one of its basic postulates within the framework of the agreement with the International Monetary Fund (IMF), which was to accumulate reserves.

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The reserve goal established by the IMF is far away at this time.

That, warns Rodríguez, makes the risk of a devaluation it is getting higher” for the market and, faced with a reality of this type, with elections ahead in the medium term, it is very negative that the BCRA has little firepower at this time.

For this reason, the Government recently implemented measures that seek to strengthen reserves, such as pulling the funds from multilateral credit organizations that public entities have in their possession to the MULC (they must go through there when they have to use them) and an indirect intervention mechanism in financial dollars (such as the exchange of public entity bonds).

Is a new soybean dollar coming?

But, in case that is not enough, the possibility of new announcements that encourage the liquidation of grains by the producers. Thus, although the Government tries to avoid it at all costs, it could implement “a program to increase exports of the dollar soybean rate, but multisectoral, or remove withholdings”, assesses the Invecq economist Juan Pablo Albornoz.

He indicates that both variables would be an improvement for the producer, although he considers that “lowering withholdings, however desirable it may be, seems difficult for the Government’s accounts” given the weight that the oilseed sector has in the total collection of export duties. Consequently, he believes a soybean or related dollar is more likely to be repeated for promote the liquidation of around 5 million tons of corn and 6.5 million soybeans which, according to the Rosario Stock Exchange, remain to be sold from the previous campaign.

This, in a context in which the forecasts for the current campaign are very negative and it is estimated that the drop in the sales projections for this year will be more than 38%. Such a complex panorama sets off an alarm sign about the reserves and makes the Government evaluate urgent measures.

Source: Ambito

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