on whom will the next value of the blue dollar depend

One of the central questions of the economy largely depends on the detailed monitoring of what these giants do. Were they discussed with the IMF? It is probable. Are you satisfied with the first definitions of the agreement? Probably not. Of course: there is a pattern of behavior that allows us to foresee that the price of financial dollars, which serve as a guide to the blue dollar, will remain at high levels, always keeping a reference to the official price. At least for the short term. And also the medium.

Needless to keep in mind a not minor reference: Numerous analysts of the Argentine economy predict that, if the exchange rate gap that separates the official price from the financial one is reduced, today around 105%, the incentives to lower inflation would be more effective, a powerful argument that the government should not dismiss.

At the risk of a reductionist approach, the Government is holding a long conversation on this issue with two funds. They are the mega-investors Templeton and Pimco, the largest funds on the planet. Without a finished precision, it is supposed that between both they treasure some $3.5bnif different estimates are taken into account, although they had bond holdings of about $10bn at the beginning of 2020. They are funds that had made heavy investments to purchase debt in pesos leveraged by the enthusiasm of ex-president Macri’s management of debt issuance and the high interest rates in 2016 and 2017.

_{trapped with no way out}

As is known, with the strong devaluations from mid-2018 onwards to which Cambiemos officials resorted, these funds saw a part of their investments irretrievably lost with the fall in the price of bonds in pesos and the difficulties to dollarize again. These difficulties have become real obstacles since 2019, since the government of Alberto Fernández understood that there was no way to maintain the brutal dollarization (flight) that had taken place without restrictions. The obstacles in the capital market became so important that it was Minister Guzmán himself who a few months ago offered them a “escape” to the funds so that they could sell their bonds in pesos and “recover” u$S 1500 M without pressing the window of the financial dollars of the MEP and CCL.

However, the most important record is offered by a source that is part of the negotiations with the IMF. He maintains that “to define the future of the exchange rate gap, the most important thing is what the funds that have bonds and that have been trapped with their investments in pesos will do.” According to the source, These funds “want to get out” but they hope that the Government will offer them some mechanism so as not to “pull” the price of the CCL, today at $216. He points out that the latest experiences have generated a rise, since they tend to sell titles and buy the same bonds abroad, which results in a rise in the CCL that usually drags down the MEP and the blue. That source adds some important information: points out that every time the gap begins to narrow, the funds “take advantage” of this behavior to carry out their exit operations, with the consequent rise. Thus, they maintain a high floor and therefore a fairly rigid gap.

As stated, the dollar (CCL) -operated with the GD30 bond- ended Friday at $216.21, for which it accumulated a 2% decline (-$4.03) in the week and a cut of 6.5 % (-$14.94) since the Government announced the understanding with the IMF. For its part, the MEP dollar sank 2.2% (-$4.64) in the last seven days to $207.59, while showing a decline of 7.2% (-$16.16) from the agreement in principle with the multilateral credit organization. Since the announcements made by the president and the minister on that Friday, January 27, the gaps with the official contracted almost 17 points to 103.7% in the case of the CCL, and 18 points to 95.6% in the case of the MEP . The blue closed at $215.5.

history repeats itself

Gone seems to have also been the intervention of the BCRA and CNV in the price of the CCL, which was used to manage that output. Many remember that a few months ago, with very restricted access to dollars, the BCRA intervened in the CCL by selling bonds, which had generated a difference between the value of the ticket in the cash market with “official” settlement and the cash market with liquidity free of regulations, which was negotiated between private parties in the segment known as SENEBI (bilateral negotiation segment). That system was also dismantled.

It falls from mature that this problem is in the conversations between the Government and the IMF. And that, for now, the IMF has not enabled any mechanism to dollarize a large part of holdings through an exchange of titles in pesos in its portfolio for bonds in dollars, as Guzmán did at the time. Debt in pesos would be exchanged for debt in dollars, something that probably a part of the Frente de Todos would not see with good eyes.