The Government negotiates with the IMF: how the result can affect the blue dollar

The blue dollar rose $5 this Wednesday and closed at $525. Last week it had broken the $500 barrier, after 45 days of relative calm, and it seemed unstoppable: it exceeded $520 in a few days and, although it later readjusted downwards, this Wednesday it rose again and reached a new nominal record in the midst of negotiations in Washington to finalize details of the agreement with the International Monetary Fund (IMF). Now, the expectation is placed on that negotiation and the entire market analyzes how the result will affect the exchange market.

As mentioned to Ambit the director of CyT Asesores Económicos, Camilo Tiscornia, part of the come up from the blue of the last time responds to the fact that “the Government has been stepping on the parallel exchange rates since the end of April and that influenced the informal exchange rate downwards”, which now seems to be rapidly recovering ground.

For the economist Federico Glustein, “we have a overheated demand for dollars due to the electoral season and the lack of dollars in the Central Bank (BCRA)”, for which reason he considers that, if the agreement with the Fund provides for an immediate disbursement of funds, it will have a positive impact on that market.

Similarly, Tiscornia believes that “an agreement with the IMF is likely to help calm the Dolar blue forward”, since it will generate a better expectation of liquidity for the Central Bank (BCRA) in the coming months and a context of greater macroeconomic calm, although he doubts that it will make the informal dollar drop sharply.

Blue dollar: a complex context

His vision is based on the fact pointed out by Gustavo Quintana, from PR Operadores de Cambio, when he maintains that “the confirmation of the closing an agreement with the IMF brings something less tension to the exchange market”, but thinks that the come up from the blue it is more related to the general situation.

For Quintana, what is pending with him Background It is only a piece of information because it points out that “pesos continue to exist, the inflation data does not improve substantially and the uncertainty of the electoral process fuels dollarization behaviors.” Thus, although he considers that it would be a good step to closing of the agreement with the IMFdoes not consider it as a preponderant element in the course of the dollar forward.

Thus, everything would indicate that the variables that are making it risebeyond the agreement with the IMF, are still present in the economy and they would not be reversed with a positive closing of the negotiations. “However, if the agreement does not come out, I think it will have an upward journey ahead of it,” warns Tiscornia. In other words, although it does not seem to be a totally decisive element to achieve a drop, it is indeed to bring greater exchange rate calm in the face of STEP.

The terms of the agreement with the IMF: a key

However, for economist Christian Buteler, “everything will depend on what type of agreement is signed”. It happens that one thing is an agreement that makes it possible to bring in some US$8.5000 million or up to US$10,000 million, as had been anticipated at the beginning because all disbursements for the year were advanced and another is a transitory agreement, which consists of to wait until after the elections to evaluate disbursements.

In his view, the problem lies in the fact that the initial expectation that was generated and the possibility that the results are not as expected. “When a very positive expectation is generated and that does not happen as expected, it can lead to a boomerang effect. In other words, it ends up being a negative effect”, says Buteler.

In this way, he logically warns that “he will not react in the same way Dolar blue, neither the bonds, nor the shares to a transitory and flimsy agreement than to a stronger one that allows dollars to be brought into the country”. And, on the other hand, he considers that the doubts and certainties that appear in the future may be very relevant because he mentions that, after the STEP, it is not known if the Government will be able to make some kind of agreement and, on the other hand, if the opposition is favored in the selection of pre-candidates, it will not be able to negotiate on behalf of the country until it eventually becomes a government.

Thus, Buteler warns that, compared to what has transpired, until now, of the agreement, the outlook for the dollar is not positive and he affirms that this is not due, in any way, to the fact that it is cheap. “A dollar of $530 is not cheap at all. The issue is that the problem of reserves, constant issuance, uncertainty and the Argentine tendency to always cover itself in the dollar generates uncertainty”.

That is why Glustein considers that “Argentina must insist on demanding the postponement of payment and an immediate turnaround that allows us to satisfy the demand for dollars that exists today” due to electoral coverage issues, but also, due to speculation due to the lack of reserves in the BCRA.

will be key the level of forcefulness achieved by the Government in closing the agreement with the IMF. If it finally manages to get fresh dollars into the BCRA reserves, which would renew its firepower, it will be a breather for the future of the exchange rate and for the course of the blue going forward.