The market analyzes a double game of the dollar: not devaluing has costs and doing it without a plan, too

Between expectations for the announcement of the Government of New measures to put the country’s economic situation back on track, analysts give their opinion on the future a few months before the presidential elections are held. The portfolio led by Sergio Massa unveiled on Sunday a package of initiatives that seeks to calm the market and contain inflation that reached 109% year-on-year in April, such as a rise in the benchmark interest rate of the central bank (BCRA), more interventions on the exchange market and agreements with creditors.

“There is not a single relevant measure. A compilation of irrelevant announcements and promises quite similar to the irrelevant announcements and measures of the last year”said economist Luciano Cohan.

“The (high) inflation in April put a new dilemma in the exchange market. If the BCRA accelerates the devaluation, it will be adding more gasoline to the fire. If it delays the exchange rate to use it as an anchor, it will sell reserves increasingly cheaper , where the net is already more than $1 billion negative,” said Roberto Geretto of Fundcorp.

The double game of the dollar: not devaluing has costs and devaluing without a plan, too

“The situation is complex and the commandment “thou shalt not devalue” has more and more costs, but devaluing without a plan can be a leap into the void. In this context, raising rates only serves to buy some time, at the cost of continuing to enlarge Leliqs’ ball”, he stated.

“The rise (in rates) by the central bank is not free (…) we cannot think that we can contain the exchange rate by intervening in it,” said analyst Salvador Vitelli. “The intervention itself is postponing the problem. In short, hiding a genuine underlying trend at the cost of issuing more pesos and selling currencies on the other; the problems we have end up getting worse.”

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“Devaluing without dollars and without a program, without certainty and political conviction, is very complicated, especially with inflation of 108% and growing, and with very strong expectations of dollarization,” economist Diego Bossio said in radio statements.

“There is a very high level of anxiety and frustration on the part of society. In election years, people generally buy more dollars than usual. There is a safeguard and that is the expectations and uncertainty of the economy and politics,” added.

inflation pressure

“For this year we expect inflation of approximately 140%. If you tell me that it can be 150%, I also believe you. That is how dangerous we are living. There may be policies that help a little on the margin, but the limits and the short blanket appear everywhere,” said Santiago Manoukian, EcoLatina economist, in radio statements.

“Our price survey for May started with 8.5%, with half a month inside. We will see if the higher data for April incorporates part of the rise that we computed in May or again, as we observed in April, the data coordinates a acceleration in price adjustments,” said EcoGo.

“Investors are paying attention to the signals from the negotiations with the IMF (International Monetary Fund), given that receiving fresh funds -at least through a rescheduling of disbursements and payments- would be crucial to reduce exchange and financial tensions in this stage”, commented the economist Gustavo Ber.