The Minister of Economy, Luis Caputo, has suggested that the restrictions will be “resolved well” and not quickly, in an attempt to calm the nervousness of the market, but some analysts have already set a date for the lifting of restrictions.
The market is highly nervous about the disarmament of the exchange rate trapsince the second phase of the economic program was announced. Since that step to the zero emission which was promised by the head of the Treasury, Luis Caputothe gap rose to the 55% in the financial markets, although in the last few days something gave way thanks to the Central Bank intervention. Although the official insisted in the last hours that the restrictions “You don’t get out quickly, you get out well”, Analysts are beginning to consider different scenarios based on a possible lifting of the restrictions.
The Government is betting on an exit from the exchange rate trap without major jumps in its price and with an atomized impact on the inflation. That is, bet that the financial dollar aligns with the one importer -official+PAIS tax- in order to gradually lift restrictions on the official exchange rate by 2025. However, this scenario is not contemplated in the market, which currently expects a jump in the wholesale rate and its transfer to inflation. The reason? That 2025 is an election year (legislative elections), therefore, it is very risky.
This is how the consultant explained it 1816: “Our base scenario is that Unification will take place this year because we assume that it would be with a jump in importing FX (and therefore a transitory acceleration of inflation) given the gap levels, and It’s too risky to do that in an election year.“, the report highlights.
However, in that same study, the private consultancy firm acknowledges that the risk would be “trivial” If the exchange rates could be unified without an increase in the importing dollar and then the timing of the exit from the trapwhich could be left for 2025with the midterm elections, since it would not generate a political cost.
The key to getting out of the cepo is in the gap
For the goverment, the key is in the gapwhich last week hit a peak of 63% and began to loosen thanks to the Central Bank intervention in it financial marketalthough this also did increase the country risk. “A smaller gap would give more time and degrees of freedom to the Ministry of Economy and the BCRA in the transition“, he said in 1816.
On this last point in particular, the consultancy Econoviews He stressed that despite the increase in the gap, the 40% area seems to them to be a “equilibrium value with a deviation of 5%”. “A smaller gap implies a lower cost compared to the opening of the exchange controls, but, as we saw, the instrument of selling dollars in the CCL did not go down well in the market and increased the country risk.. Country risk matters because If there are doubts about the sustainability of the debt, economic stability is not possible“, analyzed the consulting firm that heads Miguel Kiguel.
Will the restrictions last until 2025?
For Consultation the currency unification is going to happeneven though the timing is “uncertain.” “Our view is that the exchange rate status quo will remain at least until the end of the year, but the 2025 exchange rate balance is not finalized and exchange rate unification will finally happen.”said the private consultancy, which also contextualized with the market vision that the official rate will depreciate above inflation in the coming months.
On gap, Consultation He assured that if it was “collapses”, It will not be due to a “vote of confidence” from the market, but rather a “logical move” in the face of an explosion in the supply of dollars.
Source: Ambito
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