The strategy consists of sell foreign currency in the dollar Contado Con Liquidación (CCL) for the equivalent of $2.5 billion, which were the pesos that were issued so far by the BCRA’s purchases in the official exchange market. As a counterpart, this, with current prices, This would be equivalent to losing approximately US$1.9 billion.
As a complement, the monetary authority reduced by almost 80% the stock of puts, which were a commitment to repurchase Treasury bonds that the entity had with the banks in case the price of the bonds falls too much. In this way, The latent debt for the execution of these contracts was reduced from $17 billion to nearly $4 billion..
Bad outlook for bookings in the coming months
The market is cautious about the fact that the economic team led by Luis Caputo has decided to close the last “tap” of monetary emission at the cost of a deterioration in the Central Bank’s coffers.especially considering that, in the third quarter, the inflow of dollars into the country is usually low due to seasonal issues.
This was reflected in the Falling sovereign bonds and instability in stock exchange rates after the initial sharp collapse. To calm investors, Finance Secretary, Pablo Quirno, assured that the Government has already purchased the necessary currencies for the payment of interest of the Globales and Bonares bonds maturing in January 2025.
During the week, the Gross reserves plummeted US$659 million, up to US$27,566 million, lowest level since March 27. The decline was mainly due to a Payment of debt to the International Monetary Fund (IMF)to which were also added energy imports and the aforementioned intervention in the CCL.
The director of the CP consultancy firm, Pablo Moldovanhe said in dialogue with Ambit that the first exchange and financial shocks generated by the decision to relegate the accumulation of reserves “They end up being transferred, sooner rather than later, to the exchange rate gap, to the price of financial assets and, finally, also to inflation.“.
“A first reading is that They are going all out with fiscal and monetary policies which, up to now, have been working for them. The other reading is that They are not able to do anything about the variables that they are failing to adjust: the exchange rate and the productive one.“, he noted Martin Kalosdirector of the consulting firm Analytica.
Recession appears to be a pillar of the economic plan
In terms of activity, analysts agree that, probably, The smaller amount of pesos will not help stimulate domestic consumption, which has been depressed. months ago. The official view differs, as it postulates that the slowdown in inflation is the driver of the recovery of credit and domestic demand.
While CP anticipated a real improvement in the wages of registered workers in June, Moldovan clarified that Revenues are still 6% below the November level and warned about the latent risks to employment dynamics. “If this is combined with the exhaustion of the disinflation process and increasing exchange rate instability, The economic situation could become more fragile“, he warned.
Credit and investment: two outstanding debts
For his part, the analyst of the consulting firm EcoGo, Alan Versallisaid that if inflation actually falls, activity could pick up on the consumption side, but he foresees Problems on the investment side.
“Savings are needed to support credit and investment. However, domestic savings were severely weakened as a result of the objective of eliminating the monetary surplus.. On the other hand, as regards the contribution of external savings, as long as there is no decrease in country risk, Argentine access to credit becomes complicated,” he explained.
Regarding the latter, Versalli observed that it is It is difficult for the country risk to decrease if the market perceives that dollars are being spent on intervening in the exchange rate to contain the gap, instead of recapitalizing the BCRAbecause this would imply a lower capacity to repay obligations to creditors.
With a similar view, Moldovan asserted that, “if the perception of unsustainability of the exchange rate scheme is consolidated, the consequences may be even greater because Economic decisions are paralyzed and the few projects that could be carried out in an economy in recession are postponed“.
In this context, Minister Caputo predicted on his account on the social network X (formerly Twitter) that the bet on saving in dollars will not bear fruit since, due to the eradication of the issue, the Argentine peso will be “the strong currency” in the scheme of currency competition proposed by the Government. “Reality will prove that, soon, people will have to sell dollars to pay taxes and the peso will be the strong currency”he celebrated.
A more recessionary policy
Implicitly, this would indicate that citizens will not have enough income streams. to pay taxes, so they will have to use their savings to do so. In other words, the projected strength of the domestic currency appears to necessitate a recession. sustained to achieve its fruits.
In parallel, The low level of reserves will leave little room for paying for importsThis could be solved in two ways: either by sustaining the brutal recession, which automatically reduces foreign purchases by companies, or by postponing payments again, a situation that had been corrected in recent months.
From the Government’s side they trust that a reduction in the gap encourages the liquidation of exports and that this increases the capacity of the BCRA to guarantee the different needs of the private sector and the public sector.
Source: Ambito
