During the month of March, the depreciation of dollar added a total of 3.83%, with its last price last Wednesday at 37.55 pesos, according to the interbank of the Central Bank of Uruguay (BCU), after the Tourism Week The month of April begins with bullish hopes for the North American exchange rate.
In less than a month, the foreign currency fell 1.50 of its value, a premise that worries analysts and puts agriculture in trouble, a concern expressed through a statement from the Rural Federation (FR) that demanded a dollar at $58 in order to be competitive.
In dialogue with Ambit, the financial economist and co-founder of Sherpa Staff, Rodrigo Saráchaga, He pointed out that there are several reasons that lead the dollar to this trend. Among the variables to be analyzed, internal issues appear, related to the levels of investment, the march of the inflation and the monetary politics, but also factors associated with the international context, such as the next decisions that the United States Federal Reserve (Fed).
Sherpa commented that the Foreign direct investment (FDI) registered a maximum in 10 years during 2023 and stressed that “it ended UPM 2but projects continue to appear and, in particular, the expectation that large investments will continue”, in reference to the memorandum of understanding with HIF Global to build a plant green hydrogen in Paysandu, with an investment of 6,000 million dollars, which would be the largest in history.
In this regard, he recalled that “in July 2019, when the construction of UPM 2 was confirmed, with an investment of 2.7 billion dollars, it had an immediate impact on the price of the dollar, that one peso fell, and in the price of bonds in nominal pesos.”
“Both the effective income of dollars from foreign direct investment and the expectation generated by this type of announcements contribute to generating a excess supply of the US currency in the country. And when something is abundant, its price falls,” analyzed Saráchaga.
Other factors
On the other hand, the financial advisor Diego Rodriguez, managing partner of Gastón Bengochea & Cia, He highlighted other values to this medium such as “the inflation controlled and within the target range, the fiscal deficit in relation to GDP below 4% (latest data of 3.7%) and good projections of growth of the economy by 2024.”
To this he added that “the prices of grain in the international market, the risk country and the Monetary Policy Rate is at 9%” and observed: “I see no reason for the dollar”.
While, Deborah Eilender, economist Center for Development Studies (CED), He focused on the TPM when speaking with Ambit and highlighted that “today it is in a neutral instance, after a cut of 200 points in 2023”, while warning that “it is not having an effect on the exchange rate”.
The demand for competitiveness
The loss scenario competitiveness caused concern in the agro-export sectors where the exchange delay. Even from the Rural Federation (FR) requested that the dollar be worth 58 pesos to equal the reference average, in the order of 43 pesos.
Among the claims of the FR, they assure that the TCR with China It fell by 18% between 2010 and 2023, so that the historical average is up to 23% below, ensuring that “the loss of competitiveness is total.”
“The consequences are repeated given that the disease is the same, a sector with indebtedness growing”, they questioned from the agro, by warning about “the eternal return of the exchange rate delay.”
Something similar was observed from the Union of Exporters of Uruguay (UEU), whose president, Facundo Marquez, He considered the delay in the exchange rate “brutal” and called for thinking “not only in the short term, but also in the medium and long term.”
Even, Márquez previously requested that it be a reason for discussion of the campaign in view of the elections 2024. “All pre-candidates should make clear not only what, but how,” he said when referring to the economic plans of the political spaces.
Good forecasts for April?
When analyzing the future behavior of the US currency, the senior researcher at the Cinve, Adrián Fernández, considered in statements to this medium that the current level of exchange rate “I think that, as a trend, it reflects the market perception, fueled by several analysts (including myself), that the dollar will remain stable, or even fall further, in 2024.”
“The president of Central Bank (BCU), Diego Labat, “They have been very emphatic that they will maintain monetary policy, so we should not expect a drop in the MPR,” he considered.
Along similar lines, Rodriguez admitted that the current value “seems to be a floor” and warned that “the deflation what mattered Uruguay from Argentina during 2023 it will not be the same this year.” “If that is reversed and the BCU is encouraged to lower the MPR, we could see a (not significant) rebound in the dollar”, defined the Bengochea & Cia economist.
Finally, Eilender recognized that “from now on, the BCU has the power to intervene in the exchange market, within the framework of the dirty flotation regime. However, he clarified: “Until now, Labat has given signs that he will not do so, because the main objective is to bring the inflation to the target range.”
Source: Ambito
