Until now, the Government of Javier Milei has opted for pragmatism when it comes to maintaining the exchange rate, a key decision for the accumulation of reserves that has been observed in recent months. However, The lifting of the stocks continues to be one of the main requirements that the market has to make investments in the country, one of the main concerns of the team led by Luis Caputo.
In that sense, The minister explained what variables must be resolved before that happens.
1) Sustaining the fiscal anchor
Within the framework of the Congress of the Argentine Institute of Finance Executives (IAEF), Caputo maintained that, first of all, fiscal balance must be maintained. It is worth remembering that The Economy had a financial fiscal surplus in April for the fourth consecutive month, something that had not happened since 2008; This result had a high social cost since it was achieved fundamentally by a cut in retirements and pensions. The collection from the PAIS Tax also had an influence, which compensated for the falls verified in taxes linked to economic activity, such as VAT and Profits.
The official assured that this surplus avoided major economic shocks and highlighted that it is one of the objectives that the administration set out from the beginning, in pursuit of the fight to lower inflation.
2) Normalization of payment of imports and transfer of profits
Secondly, Caputo highlighted the importance of normalizing the financial flow, avoiding constant regulatory changes, to give companies predictability. He particularly emphasized the reduction of terms to pay for imports and flexibility for the transfer of profits To the exterior. According to the minister, this normalization has reached 70%/75%.
3) Stabilization of assets and liabilities of the BCRA
Another fundamental step for the head of the Treasury Palace is the normalization of the BCRA’s stocks, which implies having a more harmonious relationship between the financial assets and liabilities of the monetary authority. After prevent public debt from becoming unsustainableHe noted that strict control of reserves must be maintained. Likewise, the Government’s strategy includes a clear transfer of the BCRA debt to the Treasury.
Regarding this goal, the so-called “Messi of finance” during his previous time in Mauricio Macri’s government maintained that there is progress but that there is still a long way to go.
4) Reasonable relationship between reserves and passive repos
In line with the previous objective, the economic team seeks to improve the relationship between international reserves and the remunerated liabilities of the BCRA. In this line, it is worth noting that reserves grew close to US$8,000 million from December 10, 2023, while the stock of passive repos fell abruptlydespite the fact that their interest payments continue to have weight on the expansion of the monetary base.
How close is the Government to lifting the restrictions?
The Economist Federico Glustein explained, in dialogue with Ambit, that if the Government resolves the $35 billion of paid liabilities, finishes resolving the commercial debt with external sectors and continues accumulating reserves thanks to a good liquidation of the harvest, it can think about releasing the stocks sooner rather than later. However, he warned that such liberalization would cut off funds from the PAIS Tax, which has become one of the main sources of revenue.
In parallel, other specialists clarified that there is still a good amount of pesos issued that the market does not demand, which could be massively converted to the dollar if all restrictions are lifted.
Likewise, the constant rate cut by the Central Bank, although it decompresses the weight of Passive Passes in the amount of money circulating in the economy, removes incentives for investments in pesos and feeds the appetite for the dollar, as stated. He has been seeing these days with the blue and the financiers. This week the exchange gap reached its highest value since February.
Source: Ambito
