President Javier Milei decided not to send the text of the Staff Level Agreement (SLA)that is, the Technical Conditions of the Agreement which will close with the bureaucracy of the International Monetary Fund (IMF). With the passing of the hours, and as he could confirm ScopeCasa Rosada thinks Issue the decree this week and claim that the Guzmán Law does not demand the accompaniment of the SLA.
The IMF is aligned with the entire strategy. On the one hand, the sources reported that it was the agency itself that, to pave the path that must travel the decision of the loan in the Board, suggested that, in terms of legality, and given the problem that could arise from a discussion in Congress, with a decree it was sufficient. It should be noted that The SLA must rise to the Fund Boardwhich is controlled by the United States, but where Germany, Japan, China and the United Kingdom are also relevant.
Do not clarify what darkens: dollar, intervention and then
What conditions could the SLA meet? The response is brought by the president himself, who a few days ago, in the opening of legislative sessions, said: “This new agreement will provide us with the Tools to pave the way to a freer exchange scheme and efficient for all our citizens and to attract greater investments that translate into less inflation, greater growth and level of employment, with the consequent better salaries that imply less poor and homeless ”.
However, the fact is that the president He talked about a new era of “volatility” In Argentina, from which some analysts have derived a Change in the conditions of “Crawling Peg” that today is in 1% monthly. Thus, one of the basic conditions of the new agreement is that the policy of promising a certain speed for devaluation would be put in check, something that allowed investors to make their term placements in pesos and keep the expectation of returning to dollars with the profits made.
“The side effect of the reduction of” Crawling Peg “is a probable additional appreciation of the real exchange rate, which increases the vulnerability of external accounts. Since inflation will probably continue above the 1.0% monthly” crawling peg “, the real exchange rate (reser) will tend to be even more, promoting imports and reducing exports,” said a CITI Bank Report Just a few days ago.
He added: “Considering that the reer was already 1.0% more appreciated in December 2024 compared to November 2023 (before the maximum exchange devaluation), the pressures towards a new devaluation of the exchange rate could be intensified.”
I lend you Degs but it has conditions: the commitment to lower the country risk
The central fact is that, according to sources from a banking entity abroad that usually has arrival at the United States Treasury Secretariat every time the White House seeks a diagnosis of the Argentine economy, The SLA of the IMF would not explicitly enable the government to use loan dollars to intervene in the financial dollar market.
In rigor, the loan would be in Special Rights of Giro (DEG) with the exclusive purpose of capitalizing on the Central Bank (adding theoretical reserves) but would not enable to transform those Degs into resources to be used with the intervention, which in the facts would impose a new restriction to the exchange policy of the government.
From here something fundamental derives. The Government’s idea is that, for several months, There will be no way out of stock or exchange unificationsince there will be no dollars available. The immediate objective is add theoretical reservations To clear the doubts about the next debt payments, thus lowering the country risk and thus achieving a “bridge” to refinance future debt maturities, the main reason why the government cannot accumulate dollars in the Central Bank.
The opinion of an “inorganic” of the IMF: Domingo Cavallo
Interestingly, in this same line “said” a few days ago the former Minister Domingo Cavallo in his blog. “Why does the economic team insist on using export currencies to limit the official dollar gap with the CCL if it turns out that there is no exchange problem for the government?”He wondered. “If at least the CCL dollar is not liberalized and the commercial surplus currencies are still used to control the exchange rate in this market, the announcement of the elimination of the stockpile at the end of 2025 will lead to investors to wait a significant devaluation jump, even if by then there has been a significant disbursement of the IMF,” he said. Why is the exchange rate not eliminated, at least the one that applies to non -commercial operations?
Cavallo’s hypothesis is simple. He says that surely the economic team considers that it is important to keep the gap between the official exchange rate and the CCL to avoid expectations of a devaluation jump at some point in the future. That is why the liquidation of the dollar Blend.
However, he argues that reading is different. “We must consider the possibility that The expectation of evolution of the official exchange rate and the probability of a future devaluation jump, depend much more on the evolution of net external reserves than on the gap artificially controlled by the Central Bank ”. From this perspective, “the best way to avoid a destabilizing devaluation jump in the future is to find a way to increase net reserves without devaluing the jumps.”
Cavallo’s recommendation to add reservations without devaluing, at least initially, seems to be the usual. On the one hand, the elimination of the Blend dollar for exports, so that 100% of export income is sold to the Central Bank. On the other, the increase in tax incentives to exports, that is, an accentuation of the process already initiated to reduce retentions to agricultural exports and regional economies.
To this is added the increase in internal taxes to export manufactures and the disposition for the payment of tourist services and imports of final consumer goods considered non -essential must be paid for the cash with liquidation and do not require currencies of the Central Bank.
Source: Ambito
