The director of IEB (Investing in the Stock Market) and member of the Advisory Board of ABECEB, takes up the president’s phrase Javier Milei to define what to do with the stocks: “libertarians, but not liberated.” He understands that the Government, faced with the political weakness it exposes, prioritizes reaching “ideal” conditions to avoid “a political and social crisis.” At the same time, the control of financial dollars and the reduction in country risk of 1,300 points stand out as signs of improvements in the fiscal and monetary sphere, compared to the previous year. “The market interprets that banks prefer to start financing the private sector instead of the Treasury,” highlights Sosa. Below is the interview he had with Ámbito:
Norberto Sosa: I think the market has begun to moderate its anxiety regarding this issue. Although there is no doubt that in any meeting in which the economic situation is discussed, the question arises as to when the BCRA could open the stocks, A consensus is emerging that the issue continues over time. Given this circumstance, there are those who criticize the Government, saying that it has fallen in love with the stocks. In my case, I interpret that, given the political weakness of the Government, they prioritize reaching ideal conditions to minimize the risk of a discrete jump in the exchange rate, at the time of its opening. This is what the President summarizes with his phrase that they are “libertarian”, but not “liberated”, which is why they want to avoid a premature opening of the stocks that could lead them to a political and social crisis.
Q: What do you consider to be the minimum conditions for it to be possible to eliminate the restrictions?
NS.: The current administration began its management with an extremely deteriorated financial situation of the BCRA. According to our CCL “benchmark” model, which we estimate from the BCRA’s weekly synthetic balance, Towards the beginning of this year, a CCL value of close to $2,000 was projected, if the stocks had been opened.. For this reason, the number one requirement for a non-traumatic opening of the stocks was to improve the financial situation of the BCRA, increasing assets (reserves) and decreasing liabilities. The seasonality of the first semester allowed the BCRA to improve reserves, although in the third quarter they partially deteriorated again. However, with the so-called Phases 1 and 2 of the program, the BCRA made a substantial improvement in liabilities, in particular by returning the financing of past fiscal deficits, which generated the liabilities remunerated through the LEFIs to the National Treasury. For this reason Today, when analyzing our model, the gap is substantially smaller, which would allow a less traumatic opening, but it is still not ideal. Although liabilities have improved significantly and the money market looks much more balanced with a recovery in demand, Liquid net reserves are in negative territory. Continuing with the idea of minimizing the probability of a discrete jump, a more solid reserve situation would be desirable, which in the short term is difficult to project, even more so when there are no clear definitions of how the relationship between Argentina and the IMF will continue. . At the same time, although we are at a time of year in which the energy balance improves, we must wait until December for the liquidation of the fine harvest to begin. From that point of view, We might think that December could be a more favorable time, because it also generates a seasonal increase in the demand for money, but with the change of year, the Treasury will have the challenge of maintaining the fiscal anchor, in a context without the COUNTRY Tax. . Therefore, times can continue to be extended.
Q: If you had to describe the financial scenario from a year before – once the PASO elections had passed – with the current one, what differences would you find?
NS: Precisely in our last weekly report we discussed this topic. A year ago, the entire market closely followed the National Treasury tenders, with the parameter being that what was called a “positive net rollover” would be generated. What did that mean? That the Treasury needed the market to not only renew everything that was due, but also to finance it between 20% to 30% more than what was due. Therefore, a tender that achieved a 100% renewal was considered bad and generated pressure on the exchange rate. How can we understand then that a few days ago, when $7.1 billion was due on Thursday, September 26, the Treasury received offers for $5.76 billion, and finally awarded $4.78 billion, this being the first time in the current administration that it did not It was possible to renew all the maturities. Far from generating a climate of pessimism and pressure on the exchange rate, the MEP dollar pierced downwards the level of $/u$s1,200 and the country risk decreased to 1,258. For his part, the Minister of Economy celebrated having reached what is defined as the “Anker point” and that the peso shortage “officially” started. Some analysts simplify the analysis and consider that this entire situation is due to money laundering. While it clearly helps, my interpretation is that The positive effects of the fiscal surplus and the improvement in the balance of the money market are definitely beginning to be observed on the macro level. A year earlier, the accumulation of fiscal deficits and the lack of demand for pesos meant that, if the market did not make a positive net rollover of maturities, it was understood that the BCRA would have to issue to cover the gap and that as said pesos They would not be sued, it would be necessary to sterilize them with the remunerated liabilities, which projected an even greater deterioration in the future of the BCRA’s financial situation, which in turn led the market to put pressure on the exchange rate. Today the market interprets that banks prefer to start financing the private sector instead of the Treasury, generating what is called a “crowding in” effect, instead of “crowding out”, given that private credit seekers are willing to pay a higher rate than that offered by the Treasury. In turn, There is no fear of exchange pressure, given that the market knows that the Treasury has accumulated pesos in the BCRA due to the surpluses accumulated during 2024. Therefore, Although there are tremendous microeconomic and social challenges, there is no doubt that today the macro in terms of the fiscal and monetary situation is significantly better than a year before.
Q: Is there an exchange rate delay with respect to the level that the Government inherited in the first days of December?
NS: It is quite frustrating that decades pass in Argentina and we continue with the same debates about whether or not there is an exchange rate delay. In my beginnings, I was co-author with Adolfo Sturzenegger, father of the current Minister of Deregulation and Transformation of the State, of a “paper” that we titled “Convertibility and Competitiveness”, in which we precisely debated the issue of the RER (real exchange rate), TCRO (observed real exchange rate) and REER (equilibrium real exchange rate). In turn, according to our international trade, we can talk about the bilateral real exchange rate, when we compare ourselves with Brazil or the multilateral real exchange rate, if we think about the countries with which we concentrate our trade. After so many years, I pay less and less attention to these types of metrics, they do not take into account a series of factors, which are the ones we analyzed in that “paper” in terms of competitiveness. Thinking that the productivity of an economy only depends on a RER seems somewhat myopic to me.. Furthermore, an exchange rate can be supposedly backward and persist for years. That is why an analysis like the one we carried out based on the BCRA’s weekly synthetic balance seems more practical to me. Even though very rudimentary, I also find it interesting to follow the M1/Reserves relationship, as a “benchmark” of the CCL.
Q: How does the market understand that the Government will face the debt in 2025?
NS: Regarding the debt in pesos, we have to monitor the treatment of the 2025 budget in Congress. According to what was announced, the Government’s objective is to achieve a financial result (“overall balance”) balanced. Therefore, it would seek to have a primary fiscal surplus, of the same magnitude as the interest. However, I have not had the opportunity to see an estimate of the financial program that foresees what percentage of debt capital maturities are planned to be renewed and what percentage would be covered with the pesos that the Treasury may continue to accumulate in the BCRA. Moving on to dollar debt, I understand that in the debt with multilateral organizations such as IMF, IDB, World Bank, Argentina will sooner or later achieve a renewal of the same, leaving the possibility of what is usually called “new money”. With respect to the dollar-denominated debt of Bonares and Globales, as anticipated, the BCRA would have recently transferred the dollars necessary to meet the income coupons, leaving uncertainty regarding the amortization coupons. In that sense, There are several versions going around, among which it sounds more likely these days that Argentina will achieve some type of REPO to face the January maturities. The Minister of Economy has expressed that at these levels of country risk they are not interested in issuing debt, but I imagine that the situation could change for the July maturities.
Q.: What adversities does Argentina encounter regarding the international context to get out of the stocks?
NS: Fortunately, within the most important central banks in the world, basically Only Japan could tighten its monetary policy in the coming months. Both the US Federal Reserve and the ECB have begun a process of lowering rates, leaving restrictive levels of monetary policy, towards neutrality objectives. Therefore, no one imagines excessively expansive monetary policies (“monetary easing”) going forward, but at least we will not have a headwind. We could say that a breeze in favor. This context caused the dollar index to lose strength, although it recovered quite a bit in October, which could continue to improve the prices of some strategic commodities for Argentina, as we have seen what happened with soybeans since mid-August. Obviously, this will also depend on the level of global activity. In that sense, China has recently launched a battery of measures to sustain its level of activity, which benefits us. On the other hand, the latest data on the US labor market have left a clear signal that the economy is still far from a recession, and that, in the worst case scenario, it could enter a process of slowing down the pace of growth (“soft landing”). It is more difficult to understand the geopolitical risks, taking into account what continues to happen between Russia and Ukraine. Even more worrying is trying to understand how far the conflict in the Middle East could escalate.
Source: Ambito
