In the midst of the different speculations, a report from the consulting firm 1816 that was released in the city drew attention to the 4 paths that Argentina has in the midst of the loss of reserves.
After arduous negotiations with the International Monetary Fund (IMF), finally the Government seems to have reached an agreement and this Friday would be the official announcement. This Monday night a delegation from the Ministry of Economy to Washington, anticipated Ambit a tall fountain of the Palacio de Hacienda. They estimate that, after arduous negotiations, this Friday the staff level agreement would be announced. But in the midst of the different speculations, a report from the consulting firm 1816 that was released in the city drew attention to the 4 paths that Argentina has in the midst of the loss of reserves.
Under the agreement currently in force, the IMF It had planned to disburse some US$4,000 million in June, US$3,400 at the beginning of September and the same amount at the beginning of December to come. It is speculated that the economic leadership would have been able to unlock both the June disbursement and the advance of resources corresponding to September.
The consultant affirms that the situation in Argentina is pressing: “net reserves are negative at US$7.2 billion, in the last 25 rounds the BCRA sold US$1,790 million in the MULC and nothing indicates that the dynamics will change significantly until I PASS.
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The four scenarios that Argentina could face
1. Argentina gives up and devalues the A3500 in July, avoiding default (10% chance)
2. IMF relents and disburses without relevant policy changes (perhaps taxing imports), avoiding default (40% chance)
3. None give in and Argentina pays in yunes (25% chance). The drawback is that the country has already used US$3,150 billion of swap and if it faces the remaining maturities with the IMF with the Chinese currency, the tranche of US$10,000 million approved by the Asian country would be reached. Given the needs in the MULC, that plan would require China to expand the use of the swap up to $18 billion. In this scenario, net reserves could go to US$21.7 billion.
4. None yield and Argentina goes to default (chance 25%). If China does not lend, Argentina does not accept the swap conditions or the Government does not want to take the risk of stressing net reserves so much, the option is to go into default with the Fund.
In a section of the document he affirms that the best scenario for the market is an agreement with the IMF. But, if it doesn’t happen, you have to think that the average investor would prefer that Argentina avoid delays with the agency “at all costs,” even if assistance has to be sought from China, With all of that implies.
Source: Ambito
