The government took care to insist that after the election there will be no devaluation. Nevertheless, small jumps in the exchange rate are not ruled out. In the parallel market, the blue dollar gave way last Friday before the elections with a strong collapse, but remains around the $200, while the official, solidarity and financial versions of the dollar remained on the rise.
With the ratification of Martin Guzman and the announcement of the sending of a Law with a new economic program for two years, which sets the goals on the economic plane, investors will carefully await how the Government will seek to negotiate to find the minimum consensus to stabilize the economy.
These are the 5 keys about the dollar and the exchange market:
1) Less pressure on the blue dollar due to the nod to the IMF
The announcement of the sending of a bill with a multi-year economic program that includes an agreement with the IMF can generate relief in the markets. The objective of the plan is to postpone the payment of the next debt maturities to 10 years and avoid more outflow of dollars during the next months. What’s more, there is already talk that an agreement with the agency could imply the arrival of fresh funds for some US $ 5 billion.
The great challenge will be the ruling party in Congress, before the replacement of both chambers: until December 10, the Frente de Todos retains the majority in the Senate and it is presumed that it will use it to remove key projects, such as the 2022 Budget or the new Law. of Hydrocarbons, which will also generate an important flow of investments.
2) Acceleration of the rate of devaluation of the official dollar
If the renewal of popular confidence that the Government showed on the electoral stages on Sunday night does not penetrate the markets, the eyes will rest on the official dollar and the gap with the other quotes. Experts wait for the Central Bank and the Casa Rosada to support the maneuvers to defend the reserves, pending the approval of the new economic plan 2022-2023.
But the truth is that many analysts maintain that anchoring the official dollar as an instrument to control inflation would not be working since, so far in 2021 it has risen 17.8% while inflation was 37% (Until September).
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Thus, the tension of the official dollar versus monthly inflation continues to rise: last month the official dollar rose only 1% and inflation was 3.5%. If the exchange rate delay deepens, the risk is that sooner or later a correction will prevail to prevent the BCRA from running out of net reserves. With this scenario, it is very complex that the inflation rate falls in the coming months.
The UBA researcher Gabriel Montes carried out an econometric exercise with data on the official exchange rate, the parallel, the gap and inflation from 2004 to 2020. “Prices follow the official exchange rate, the illustrative example being the 2015, when the assumption was that it could be devalued and prices were not going to change because they had followed the blue. And what happened is that inflation was devalued and exploded. The theory says that prices are tied to costs and these are affected by the dollar through imports, which are made to the official, ”he said.
3) More (or less) firepower for the Central Bank
The Central Bank continued to intervene strongly in the spot (selling US $ 574 million between 10/28 and 11/04, a selling streak that would have extended in the last week) and in the futures (as inferred from the strong increase in volumes traded). In other words, according to Abeceb, the Central Bank reached the elections with liquid net reserves “Converging to zero”.
The consulting firm LCG pointed out that in total, at the last closing, gross reserves total US $ 42.8 billion, net US $ 5 billion and liquid reserves (discounting gold) just US $ 1.5 million. “It is such a meager sum that it enables permanent counting and imposes a degree of instability and uncertainty that translates into widening the exchange rate gap and greater interventions by the BCRA in the foreign exchange market, trying to avoid it,” they indicated.
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In the scenario of greater devaluation of the official dollar, a very gradual increase in rates would not be ruled out, which would allow absorbing the overabundant liquidity of the market that has been channeled into financial dollars and the blue dollar in the absence of good profitable alternatives in pesos.
But skeptics today deny a radical change in monetary strategy. Sergio Morales, president of Wise Capital warned that the devaluation rate should be the same as the cost paid by the Central Bank when placing debt, and that if in that logic we think that the exchange rate adjustment is 16% per year (in what this year increases 12% against inflation of 37%) and that the Leliq rate is 38% per year, the dollar should increase 22%, that is, because of the differential.
4) Look at the bond market for next steps
Specialists agree that to feel the reactions to the elections it is necessary to observe the level of intervention of the Central Bank in the bond market. In the last three business days you sold about u $ s100 million from Bonar 2030 (AL30) to keep the informal in check.
It should be remembered that at the beginning of October the National Securities Commission (CNV) established two measures in order to control the price of stock exchange rates. On the one hand, it halved the maximum amount to buy the MEP dollar, an operation that is carried out through bonds under local legislation, mainly through the AL30.
At the same time, the resolution of the entity led by Adrián Cosentino blocked the possibility of acquiring financial dollars with any other asset other than local law bonds and prevented transferring them abroad when CCL or MEP was acquired with AL30.
5) Is there an exchange split coming?
One way to ease tensions on the dollar is by relaxing purchase restrictions. But if the contexts do not allow general flexibilities, one can think of focused alternatives, such as, for example, install a commercial dollar for operations abroad, another for international tourism and a less tied financial one to satisfy the markets. Some suppose that a “Teddling” of the exchange rate scenario to limit the number of markets that operate in parallel to the official one.
Although the government systematically denied it, unfolding is always an option. From the Econviews firm they do not foresee that it is a plausible measure, since it would generate serious difficulties, a breakdown in confidence, a financing problem for the State for 2022 and an increase in the cost of taking on debt.
Source From: Ambito
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