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why the BCRA fails to add reserves, despite a long buying streak

why the BCRA fails to add reserves, despite a long buying streak

He Central Bank (BCRA) He has been constantly buying dollars in the official exchange market for some 13 consecutive days, mainly thanks to the development of the soybean dollar 3, which guarantees him a daily income of foreign currency. Thus, it managed to reverse the negative balance that it had been having in that market in May, so that it accumulates purchases for around US$195 million in the exchange market. However, it has not managed to recover the reserves, which fell sharply in some days, and, as of today, are around US$33,000 million, almost US$10,000 million below the level at the beginning of the year. In the City, analysts explain why this situation occurs.

According to a report by Ecolatina, although the liquidations of the soybean/agro dollar accelerated in recent weeks and the net demand for dollars in the MULC by private parties showed a certain decline, which allowed the red to be reversed, so far in 2023 the BCRA ceded more than US$2.8 billion for their interventions in the official exchange market, this being the worst start to the year since the arrival of the stocks. Likewise, the economist from the consulting firm Santiago Manoukian details to Ámbito that, until Friday, May 19, gross reserves had fallen by close to US$1.9 billion in the month and net reserves (without SDRs), more than US$900 million. millions.

BCRA dollars: the elements that make reserves fall

When looking for the reasons for this dynamic, sources close to the Government explain that “there are payments to international organizationson the one hand, and variations in asset prices that make up the reserves, on the other”.

And it is that, this month, the BCRA had to make payments for US$1,100 million (US$800 million, to the IMF and the rest, other international organizations). Likewise, possible variations in the prices of assets, such as the yuan, which recently lost value, and gold, which rose a lot a few days ago and then fell in value, affect the dynamics of the reserves. “That is an accounting drop, because the assets are still there,” the source details.

Another of the reasons that Manoukian points out is the use of the swap with China, given that, as a result of the recent agreement with the Asian country, part of the swap that went into unrestricted reserves would be used to pay for imports.

The main outlet for dollars: intervention

But, according to him, “the main tap that drips dollars is the item “Others” of the BCRA balance.” This item accumulated a volume of US$900 million between 5/5 and 5/15, as reported by the monetary regulator and includes different types of operations. “Among them, the use of BCRA reserves in the market for financial dollars in order to contain the exchange rate gap”, points out Manoukian.

In the same sense, the Invecq economist Juan Pablo Albornoz points out that “the interventions that the Central has been carrying out in the secondary market to contain financial exchange rates that are operated on the screen (PPT segment) are the main factor in the variation in the Central Bank’s reserves”.

It happens that, according to the economist Lorenzo Sigaut Gravina, an expert in macro at Equilibra, “until the end of April, the BCRA, within the framework of the agreement with the International Monetary Fund (IMF)had no possibility of intervention in the financial dollars”.

But, from that moment, the economy minister broke that rule In agreement with the Fund and the monetary regulator, it began to intervene in the bonds that are used to make MEP dollars and Cash With Liquidation (CCL). Keeping financial dollars “artificially low” had cost the Central Bank $800 million in net reserves between April 25 and May 17, at an average rate of $50 million per business day, according to Equilibra data.

So, that variable began to have an impact on reserves. In this regard, Sigaut Gravina clarifies that “one thing is the reserves that the BCRA buys in the official exchange market (MULC) and another is the volume that it uses to intervene in financial dollars.”

He estimates that, according to Equilibra calculations, on average, The BCRA has been losing close to US$50 million daily through intervention in financial dollars. And that means that, if you do not buy above that volume in the MULC, the result is negative.

A short sheet that worries

“The problem is that this is a short sheet because the Central has to invest around US$50 million to keep them quiet and, for that, it depends on the agricultural dollar and imports”, indicates Sigaut Gravina.

Although in recent days the BCRA decided to change its strategy and appeal to the surprise factor in its interventions in the financial dollar market (that is, it will not continue to do so systematically, but rather skipped), when it withdrew from In that place, the prices climbed about $40 to the area of ​​$480, aligning with the informal dollar at that time.

From Equilibra, they consider that The Central will continue to intervene in financial prices. That, without a doubt, is a threat to the entity’s balance sheet, but, given the low stock of reserves, they do not rule out that the Executive may continue to double the official exchange market or demand the use of dollars from the private sector for certain payments. .

Source: Ambito

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