Rentals: how are contracts negotiated in dollars?
Now, according to market sources consulted by Ambitagreements for this type of rental are usually given in hard currency directly and without updating, or a price in dollars that the owner wants to set, and from that, quarterly or semi-annual updates are established based on inflation, but with a pesified contract.
The dollar outperformed inflation in August, but what can happen in September?
The inflation is projected between 11 and 12% for the month of August by the main consulting firms, although the official variation that measures the National Institute of Statistics and Censuses (INDEC) will be known on Wednesday, September 13.
In this context, to know which variable would be least detrimental to tenants when agreeing to update the contract (dollar or inflation), it is necessary to take into account that the Dolar blue It closed at $735 on the last day of August and, during that month, it registered a jump of 33.6% (+$185).
However, in recent days it stabilized, to the point that this Friday, September 8, it closed at $710. In this framework, the economist Federico Glustein He told this newspaper that in his vision “the parallel currency hardly beats inflation” and explained that it is due to “government intervention in the MEP dollar”, which puts the value of the dollar in line. blue. “Therefore, it is difficult for it to rise 10% in a month, I don’t think it will exceed $750,” highlighted the economist.
Furthermore, Glustein argued that dollarization is occurring through the MEPbecause “it’s cheap“comparatively compared to the blue, which allows the coverage in hard currency to be channeled in this way and will keep the parallel below inflation.
In contrast, the Epyca economist, Joel Lupieri, was skeptical of the idea that Dolar blue run from behind to the inflation over the next two months. “Beyond the fact that a decrease in exchange tensionsit is more than likely that these will increase again as the October elections get closer,” he explained and predicted that the informal dollar could reach “between $800 and $850” in the days before the election.
“In this way, the Dolar blue would again get ahead of the inflation what, as generally happened in recent months,” he added.
In this sense, it is true that in the first half of the year, the blue alternated months below inflation and others above the CPI. But, after the post-devaluation surge in August, the parallel currency accelerated strongly and accumulated in the first eight months of the year a rise of 110.5%far above what the accumulated of the inflation with the fact of August included, since between January and July it accumulated 60.2% (in CABA, it accumulated almost 80% counting the eighth month of the year).
Dollar vs. inflation: what can happen after the October elections?
After the presidential elections of October 22, there is no unanimity among analysts as to whether the blue will remain above inflation, or vice versa, which is why it becomes complex to have to project because the different candidates propose different economic paths for the National currency.
Therefore, we take as a starting point the Survey of Market Expectations (REM) for July, that performs the Central Bank (BCRA)and that projected a inflation for August of 7.9% and 140.7% for all of 2023.
It should be noted that the report was prepared prior to the 20% peso devaluation that occurred after PASSEDwhich accelerated inflation with which for private consulting firms the CPI for August rose to two digitstherefore the interannual variation of this year also deepens (some consulting firms estimate close to 180% for all of 2023).
On the other hand, the City’s inflation between January and August totaled 79.8%, while the Dolar blue In that same period it rose 112.43%, far exceeding the CPI.
Meanwhile, the expectation of official dollar, according to Matbarofex, end-December 2023 is currently trading at $635 – after the inauguration of the next president. Although the price shows a difference of 80% compared to today’s $350, in recent days devaluation expectations have dropped slightly, “either because there is no immediate dollarization or because progress is being made with a split that requires less initial adjustment of the official dollar,” they explain from MegaQM.
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Photo: Unsplash
In this framework, economists agree on the difficulty of being able to project the value of Dolar blue after the elections, since these scenarios are highly volatile and “in this particular election it seems to have been exacerbated due to the proposals that could lead the country to a ‘dollarization’ of the economy.”
“Thinking about renting, being tied to the local currency (which, with its great defects, is still the local currency in Argentina), makes more sense. Thinking about payments with a dollarwhich could very well skyrocket, touching or exceeding $1,000 if a proposal like Milei’s wins, seems far-fetched,” he noted. Lupieri.
For his part, Glustein predicted year-on-year inflation that would be well above 150% by 2023. Furthermore, with the mitigating factor that part of the monetary issue takes place at the end of the year and the fiscal deficit accelerates, “unless there is a type plan Bonex that can rescue that amount of papers and reduce activity.
Regarding the Dolar blue Specifically, he highlighted that the current value shows a low floor due to the “intervention” in the MEPwhich is why as the presidential election could continue climbing and “Within six months we will probably exceed four figures and be at least $1,100“.
Meanwhile, another market economist consulted by this means maintained that the inflation could be above Dolar blue due to the adjustments generated by the incoming Government.
In summary, the majority of the economists consulted concluded that the price of Dolar blue would be above the inflation in the next six months, which is why it would be advisable to continue adjusting rents for inflation and not according to the US currency.
Source: Ambito
