For now, andl International Monetary Fund It remains under observation. The negotiators of the organization managed by Kristalina Georgieva who are discussing with officials from the Ministry of Economy the way to solve the dialectic of exchange rate policy, the chapter that remains to be closed to finish agreeing on the clauses of the new Extended Facilities, are looking carefully (at least that is what is perceived in Buenos Aires), the way in which in the last days the devaluation of the peso in the official version gained some ground to the Blue and the financial dollars. And how the gap is once again being debated at 100%, when a few weeks ago it was taking off towards an apparently unattainable 130%.
According to Argentine officials who negotiate via zoom, the promise to activate a revaluation of the official against free dollars would be being fulfilled, accelerating the “crawling peg” mechanism to avoid a shock-type devaluation as much as possible.
As is well known, the negotiators in Washington consider that the currency’s starting level (around $220 at the beginning of April) was an unsustainable price to discuss new rules within the Extended Facilities and that, if the economic team wanted to talk seriously about the possible conditionalities to discuss advancing items or shifting maturities, from Buenos Aires a strategic and coherent policy should be proposed on the revaluation of the dollar against the official price.
From Economy they flatly refused any type of shock; but it was talked about crawler peg mechanism. The technicians of the IMF They promised to observe the evolution of the idea for a few days, which has been reflected since the end of the second week of May. However, the publication of the inflation index for April, which showed a price rise of 8.4%, overheated the free exchange market, which altered the official strategy. Now, since last Wednesday, it would seem that the official idea was back on track and deepened in the first two days of this week. In three days, the Blue held its value while the official one has already devalued more than 2%. A still slow pace for Washington’s eyes, but in tune with what the organization had been promised.
The truth is that this strategy is more to the liking of the IMF than the one applied up to 10 days ago, and that it was based on the direct intervention on the exchange rate of the MEP, with full placement of dollars to sustain the general value of the exchange policy. In those days, officials from the Palacio de Hacienda justified the change in operations and the movement to end direct interventions in the financial dollar markets; something that was analyzed from the headquarters of the financial organization as an artificial exchange policy of intervention on the exchange rate, far from everything committed in the Extended Facilities in force since March 25 of last year.
What was signed in 2022 with the IMF explicitly prohibits using dollars from the reserves directly or indirectly to control the exchange rate, which led to the validity of the agreement entering pause mode. Since the decision of Sergio Massa’s team was taken in the midst of the negotiations in Washington for the reformulation of the agreement; there were no major real consequences either in the relationship with the Fund or in the day-to-day macro reality. However, from Washington it was clarified that once the negotiations were closed and the new version of the Extended Facilities was in effect, everything would return to normal.
The new strategy of revaluation of the dollar through the acceleration of the devaluation of the official price in days of certain calm in the alternative, is now well seen from the headquarters of the organization. However, everyone agrees, it is still far from the ideal that is required to close the new agreement.