The Government celebrated four results last week: the approval in the Senate of the basic bills and fiscal package, the inflation of 4.2% in May, the refinancing of the swap with China and the disbursement of the International Monetary Fund of almost u $800 million. These are signals that I wanted to offer to the market. Although this does not imply that the challenges for its macro planning plans are not the order of the day, especially on the currency front, despite the respite that these developments gave it. The Central Bank lost in recent weeks a key engine that had driven its dollar purchases and the Government is preparing for a period of seasonal reserve drainage. Thus, Luis Caputo places his hopes on the negotiation with the IMF of a new program, with which he will seek to obtain more debt.
The truth is The BCRA faces increasing difficulties in rebuilding its reserves. Except last Thursday, when he bought US$137 million, throughout June he practically stopped being able to buy foreign currency. He managed to chain three consecutive rounds with a selling balance in the official market and on Friday he had to part with US$121 million, the largest daily amount since February.
In addition to the pace of agricultural liquidation and the progressive reduction in the percentage of unpaid monthly imports, there was another important factor. Starting at the end of May, the granting of loans in dollars came to a screeching halt to companies by local banks. As Ámbito said, the strong growth of this type of credit had been a key crutch to sustain foreign currency purchases of the Central in March, April and the first part of May.
According to BCRA data, US$979 million in gross terms of loans in foreign currency were awarded in March and US$830 million in April. These numbers marked a jump of 518% compared to the average level recorded in years of exchange stocks, according to calculations by economist Damián Pierri. According to the numbers of the consulting firm 1816, based on official information, Between February and May the stock of this type of financing grew by almost US$3,000 million.
This represented an “inflated” supply of dollars during that period., which helped the Central and allowed it to sustain the purchasing balance. It happens that, by regulation, the foreign currency obtained by companies through these credits in the local market must be settled (80% in the official market and 20% in the CCL dollar in the case of pre-financing of exports and everything in the official in the case of a regular loan). Coming from a period of low level of operations of this type of financing, the maturities to be settled are limited and the net flow through this channel was very positive.
But things changed. Since May 20, these loans “completely stagnated” and left the BCRA without a net balance in the exchange market, he highlighted 1816 in its latest report. What happened? For the consultant, one of the reasons was the last drop in the interest rate in pesos that the monetary authority applied.
“Prior to May, with an interest rate in pesos much higher than the 2% crawling peg, the financial cost of taking out debt in dollars was much lower than that of taking out debt in pesos. The issue is that, after the last BCRA cut, the cost for companies of borrowing in pesos became 2.6% TEM (monthly effective rate) against a cost of borrowing in dollars (measured in pesos) of 2.6%. 3% TEM”, a very small difference, explained 1816.
Although now foreign currency loans from local banks are no longer a contribution to additional foreign currency supply, when the large loans granted in previous months begin to mature, they will become an additional demand for reserves as companies will go to seek the dollars from the BCRA to cancel the loans to their banks.
The BCRA, reserves and stocks
With everything, The Government is already preparing for an unfavorable period for reserves, which are still at negative levels. In addition to what was mentioned about loans in foreign currency, payments for energy imports are added in June. And, as always happens, in the second semester The time of lower foreign exchange income arrives due to the end of the thick harvest, which predicts a drain on dollars. Something that goes against the need of the economic team to add foreign currency to advance in opening the exchange rate. Perhaps that is why the Government once again drew the line.
This was recognized by the Ministry of Economy and the Central Bank in the joint statement they published after the approval of the eighth audit of the IMF about the current program. There, they anticipated that in the review It was agreed to modify the reserve goal. As in the first section of 2024 they exceeded the goal established in January, it was agreed to raise the established objective for mid-year: Instead of the accumulation of US$9.2 billion of net reserves initially determined, now the goal will be US$10.9 billion.
Despite this, since according to BCRA data with the arrival of the recent disbursement of the Fund, the recovery of net reserves since December 10 reaches US$11.9 billion, the goal for the end of the year remained unchanged at US$9.7 billion. This implies that, between now and December 31, The path foresees a drainage of US$2.2 billion.
Javier Milei himself pointed out on Wednesday at Expo EFI that the Government has room to meet the goals even in the face of the prospect of a considerable decline: “There is seasonality in the third quarter and reserves are lost.” Although it is a seasonal dynamic that occurs every year, the problem is that the net reserves remain in negative territory despite the recovery experienced since December. According to calculations by the consulting firm Eco Go, owned by Marina Dal Poggetto, before the arrival of the US$790 million from the IMF, they were negative by more than US$2.3 billion.
Sebastian Menescaldi, director of Eco Go, analyzed it this way in dialogue with Ámbito: “The fall in reserves is predetermined by the payments that must be canceled with the IMF and the bondholders because today there is no alternative financing. So the rest of the market should give zero to comply. Looking at the goals between now and the end of the year, what they expect with net reserves is that they never become positive given the current level. And with negative reserves we know that we will not be able to get out of the trap”.
Menescaldi’s reading connects with the fact that the statement from Economy and the BCRA (pending the IMF Staff Report) has assured that In the agreement with the Fund there is no committed date to open exchange control and that the decision will be made by the Argentine authorities “as long as these measures do not imply excessive risks for the process of reducing inflation and strengthening” the Central Bank’s balance sheet.
Thus things, the official bet For the opening it goes through the negotiation with the multilateral organization in search of sealing a new program that, beyond refinancing the US$45,000 million of current debt, includes a additional debt to reinforce reserves, as Caputo pointed out. A negotiation whose deadlines and details are still uncertain.
Source: Ambito
