As part of his tour of China, President Alberto Fernández maintains a work agenda within which one of the main axes is the expansion of the freely available funds of the swap with the eastern country, within the framework of the Memorandum of Understanding (MOU) that the Central Bank (BCRA) will activate with its local pair and of which They expect news for this Wednesday, October 18, as Ámbito had anticipated.
For that, the president of the Central traveled with the president, Miguel Ángel Pescesince, as an official source explains to this medium, “the central banks of the two countries have a common work agenda, which, on this occasion, includes the activation of the MOU, an agreement that has four areas of action : Economic, International, Superintendency and Operations Research, with the following agenda at each point.
- In economic research it is developed joint and collaborative research work.
- International covers is the collaboration in participation in international organizations in which both nations agree, such as the G20 and the BRICS.
- Superintendence refers to the entire control management of the two Chinese banks that operate in Argentina.
- Finally, Operations includes the swap managementwhich, without a doubt, is a central issue for Argentina in a context of scarcity of reserves and exchange volatility due to electoral uncertainty.
What is the swap and what will be announced?
Let us remember that the swap is an exchange of currencies between the BCRA and the Banco Popular Chino (BPC). The first agreement between both central banks was established in 2009. In 2014, a second agreement was signed, which was renewed in 2017 and complemented at the end of 2018 with a supplementary one. And, in August 2020, the agreement was signed and renewed this year.
Thus, what is signed this Friday is the renewal of 350,000 million yuan renminbi of free availability, equivalent to US$5,000 million (since the equivalence is around 1 to 7 with the dollar), within an agreement general for about US$18,000 million, which enter the BCRA account and give it the possibility of improving the situation of its net reserves, as happened in June of this year.
And, as the economist Pedro Gaite points out, “The first tranche of the swap was essential for the first half of the year to sustain the level of imports and even comply with the International Monetary Fund (IMF)“He points out that there is almost no money left of those US$5,000 million (less than US$1,000 million) and that is why the activation of this second tranche is essential, especially “in this scenario of such strong dollarization what we have”.
Swap with China: what the Government will announce
In that context, as stated, In the next few hours, there could be news about the activation of a new tranche of the currency swap with the Popular Bank of China (BPC), within the framework of the meeting that this Wednesday at dawn in Argentina, afternoon in China, the president of the BCRA, Miguel Pesce, with Pan Gongsheng, his counterpart from the eastern countryand they will agree to expand this currency exchange agreement by about US$5 billion (the equivalent in yuan).
“This is key news due to the critical situation of the BCRA’s reserves and in view of the bridge that will exist between this Sunday’s elections and the electoral transition in December. It is a factor of indirect foreign exchange supply that can help calm factors that strain demand and encourage possible currency runs,” says economist and director of MyR Consultores, Fabio Rodríguez.
In this scenario, consider that It will be important to activate a new section of the swap, on the one hand, to address the real front and to ensure that the import front is not so pressing, as well as on the financial front, to strengthen intervention in parallel exchange rates..
It happens that, according to Gaite, in recent months, the commercial debt accumulation tool has been widely used and he points out that this new tranche is central to giving a signal of greater strength of the BCRA’s reserves. In that sense, he believes that “it is key that this section is enabled for exchange intervention as a contribution to the firepower of the monetary regulator and an element to loosen devaluation expectations.”
However, from Eco Go, economist Sebastián Menescaldi warns that, although it is true that it is positive that the new section of the swap is activated, that money must be returned and that loads more commitments for next year, on the accounts to be paid. pay. “It is a relief figure for the BCRA within the framework of the political race, but then we have to see how it will be repaid,” he says.
Source: Ambito
