Dollar: With fewer reserves, controlling the exchange rate gap is an increasingly bigger challenge for the BCRA

The parallel dollars they come with downtrend over the past two and a half weeks. The gap between the financial exchange rates and the official rate was able to reach 40% thanks to the strong intervention of the Central Bank (BCRA) in that market, which in ten days demanded around US$270 million of the reserves. And the blue rate followed suit: it fell sharply, around $130 pesos in the last 17 days. But the Government anticipated that its interference in the Contado Con Liquidación (CCL) would be discretionary and this Wednesday it let the exchange rate run, which recovered some of its quotation.

The financial gap is around 37% and the blue one is at 47% (below 50%). It seems that These levels of “spread” are “acceptable to the Government”which sees 40% as a key threshold and a certain resistance, since it took several days to break it.

And as he explains to Ambit the Economist Christian Buteler “The problem with the gap is that Inflation is traveling above the crawling pegeven despite the slowdown that has been taking place” and the data expected for July, which would be around 3.8% and 4%.

Notes that ““The exchange rate is still perceived as being behind” and considers that the monetary policy rate should be corrected upwards to take real pressure off the market parallel dollar. Let us remember that the exchange rate tension, which pushed the blue dollar from around $1,040, which it was trading at in mid-May, to $1,500 on July 12, was triggered by the BCRA’s decision to lower the rate from 50% to 40% nominal annual on May 14, which is equivalent to a monthly yield of 3.3%.

The gap, a key element for the Government’s plan

Since then, The pesos began to leave the fixed terms en masse and went to the dollar. The blue dollar gap reached almost 63% on July 12 and generated anxiety in the city and the Government. Several days of exchange rate volatility with an upward trend led to the Minister of Economy, Luis Caputo, and the president of the BCRA, Santiago Bausili, announcing last Saturday, July 13, the beginning of what they called “a new monetary plan“, in order, they said, to that the amount of pesos in the monetary base does not grow.

Buying dollars in the official exchange market and sterilizing the issue used for this purpose by selling dollars in the financial market. intervention in the dollar settled with cash (CCL) was applied with the end of lowering the price of the dollar because it had reached $1,500 and the gap went from 15% to 60% in two months. And it is working because, as the analyst Salvador Di Stefano, known as “the dollar guru”, says, we see “a CCL and a MEP that are very even and that indicates that the cost of entering and withdrawing money is almost zero in Argentina today.”

This is given in a context that is key for the exchange market in Argentina. “We are going through the More complex months for the dollar and the key now, beyond the percentage in which the gap is located, is if it accelerates or if the government manages to sustain it at these levels“, says the economist and director of Analytica, Claudio Caprarulo.

The reserves, the gap and the cepo: a delicate trilogy

Considers that, As of October, “a good result would be if it were close to 30%” (or lower) and that it could be sustained going forward. It happens that, as Buteler suggests, “the intervention has a limited impact on the market because it cannot be perpetuated over time given that this mechanism damages the reserves and the capacity of the BCRA to accumulate dollars.”

“I think that The limit of this strategy is the income of dollars. That is to say, they are going to maintain the foreign exchange intervention until they obtain funds,” the economist of an important bank tells this newspaper. But The main problem is the health of the reserves in this strategy.

And it is that The Central Bank has been selling reserves for six days in a row. Throughout July, net sales of US$181 million were recorded, the highest since December 2023: they stand at US$26,399 million, the lowest value since the end of January.

And, according to a report by the consulting firm Portfolio Personal Investments (PPI)“forward, Your performance should get worse since the seasonality of imports and exports will continue to play against the accumulation of reserves.” And remember that it usually sells reserves in the third quarter and, having made access to the official market more flexible for more than 60% of imports, greater pressure was added between September and November, when there will be a flow of more than 100% of imports accessing.

The big problem is that The Government is seeking to release the restrictions going forward and this is something that the market is insistently asking for.. The gap is a key element in this path and, although Di Stefano points out that “nobody knows what the ideal percentage is”, he hopes that “in the coming months, we will soon see a CCL loosening.”

He explains that this will be related to the amount of pesos that the BCRA will withdraw, since the Government anticipated that it seeks to make the national currency a scarce commodity so that Argentines have to sell the dollars they have in their possession to pay expenses such as taxes. However, he warns that The success of this strategy depends mainly on “having a successful whitewash and moratorium” and it is achieved an agreement with the International Monetary Fund (IMF) which involves a disbursement of US$10,000 million.”

These elements will be key to seeing a consolidated improvement in the dollar trend.Basically, what the market is asking the Government for is the arrival of dollars to guarantee the sustainability of its plan and to fulfill its promise to the market to lift the restrictions at some point.