After the first week – although with two less business days – New exchange scheme, Pablo Repetto, Chief of Aurum Research Securities, He assures that the government’s decision regarding the flexibility of the stocks and the design of a band “was taken by the market”wide“However, he considers that” given the fiscal and monetary context “, the exchange rate will range around the central area of the band, and will not touch the tip of $ 1,400 in the short term.
In turn, the specialist points out that this model no longer points to dollarization, as President Javier Milei had initially raised, but that the economic team would seem to have opted for a coin competitionsimilar to what is seen in Uruguay and Peru.
Anyway, attending to the intention of the economic team to lower inflation over accumulating reserves, Repetto warns: “Do not accumulate reservations significantly being able to do so in a time as appropriate as in the second quarter, excessively appreciating the weight, it looks quite reckless.”
Journalist: How do you explain what during the first three days of the new exchange scheme the dollar finally did not reach $ 1,400 and operated below market estimates?
Pablo Repetto: It was surprising that they made the decision to design a very wide band, which is very significantly flexible and that an important disbursement was achieved. The combination of these factors, added to what the BCRA decided on Tuesday about the entry of financial currencies, influenced the exchange market. Anyway it does not seem to us that the market consensus was going to the top of the band. In general, one would expect that given the fiscal and monetary context and the need to avoid current account deficits, the exchange rate oscillates around the central area of the band.
Q.: What do you think is the equilibrium exchange rate?
Pr: It is difficult to define the real exchange rate of balance, but a good guide may be the IMF Staff report that in its risk balance indicates that the real exchange rate consisting with a balanced current account (and considering the fragility of the reserve situation) It would be around 20% above the real value prior to the agreement.
Q.: Why bet this time to the entry of foreign capitals (according to the last statement of the BCRA), considering the last macrista experience?
Pr: It is logical that to the extent that you want to release the exchange market, they are authorizing income from financial capital. The safeguard of maintaining the amounts admitted for 6 months moderates the risks in a much more important way than in the past. We also believe that the possibility that Argentina is considered an emerging market, which allows Argentine actions to be part of the most important indices, depended on that flexibility. Therefore it is a decision in the right direction if the Argentine market wants to be normalized.
Dollar End of Cepo 1500
Scope
Q.: In this new stage, how would the government’s economic plan define? Is it still pointing to a dollarization?
Pr: Government’s signals and what follows from the agreement with the IMF seem to realize that What would be sought is a competition of coins rather than a dollarization. A scheme more similar to those seen in Uruguay and Peru, Both are almost those mentioned in several of the IMF Staff reports in recent times, and even in some statements by government officials.
Inflation goal versus reservations goal
Q.: There are economists who estimate that April inflation, against all prognosis, could be positioned below March. Are you seeing the same?
Pr: It is still to be able to measure the impact on prices of the exchange rate adjustment. In principle there have been effects in several items and on the other hand, services prices (which could be less affected by the exchange effect) go to a rhythm that is persistently above 3%. In this context it is that It would seem difficult for April inflation to be below 3.5%.
Q.: The Government mentioned that the priority was to lower inflation and not buy reservations, at least in the short term. However, for July there is an IMF disbursement that would be granted against reservations. How could this inconsistency be solved?
Pr: In part The accumulation of reserves that is marked as a goal could come from loans from other organisms. The reserves goal is corrected upwards or lower loans on a predetermined limit. That would help to require less accumulation of reservations. However, we believe that they do not accumulate reservations in a significant manner being able to do so in a time as appropriate as in the second quarter, excessively appreciating the weight, it looks quite reckless thinking about the importance of the accumulation of reserves to get the country risk loud. Besides that In any adequate reservations metric, the Argentine situation is very precarious.
Source: Ambito
