City guru explained why this will be a key month and recommended what to invest in

In an opinion column he noted: “The world has entered into turmoil. Argentina is in a very good position, it has a fiscal surplus, but a heavy agenda ahead”. He also explained why this It will be “a key month” and he recommended what to invest in.

The Argentine economy is affected by three unwanted eventsthe drop of more than 10% of the Nasdaq index (which could drag down the rest of the American indexes and emerging markets), the devaluation of the real and the big drop in soybeans. This could affect the local markets, and that began to be felt last Thursday, despite the fact that our country enjoys a fiscal surplus, has closed the emission taps and is showing signs of an economic recovery.

Soybeans in 2022 were worth US$17.50; today they are worth US$10.20 per bushel. The value of soybeans in real terms (adjusted for American inflation) was US$618.2 per ton under the government of Cristina Fernández, US$441.20 per ton under the government of Mauricio Macri, US$539.8 per ton under the government of Alberto Fernández and US$428.60 per ton under the government of Javier Milei. Clearly, soybeans are Peronist, they collapsed under Macri due to the trade war between the United States and China, and now we are facing the second chapter of the same event. China hoards 30 million tons as a safeguard against probable reprisals if Donald Trump is president.

The global economic slowdown has had a negative impact on soybeans. For the 2024/25 campaign, soybean production is estimated at 422 million tons and consumption is estimated at 402 million tons, with 20 million tons remaining. There is an accumulated soybean stock of 128 million tons. There is no immediate scenario for an increase.

In the 2019/20 campaign, the United States produced 97 million tons; for the 2024/25 campaign it expects to produce 121 million tons. Brazil, in the 2019/20 campaign, produced 129 million tons, for the 2024/25 campaign it expects to produce 169 million tons. Argentina, in the 2019/20 campaign, produced 49 million tons, for the 2024/25 campaign it expects to produce 51 million tons. This is why we say that we have to lower withholdings; there are no incentives to produce more. Between Brazil and the United States, in recent years, they have increased production by 64 million tons, more than Argentina will produce next year. There is a surplus of soybeans and a lack of consumption. If there is no decrease in production due to climatic problems, Argentina will have to start thinking seriously about how to reconvert. On the other hand, the crushing plants have become obsolete and there is no new investment to transform soybeans into jet fuel, but we will leave that for another note.

Without strong dollar inflows from the countryside, reserves are suffering. As of Thursday, they totaled US$27,065 million, however, the closure of the emission channels, plus the absorption of pesos, keep the alternative dollars in check, which, if it were not for external events, would be at values ​​much lower than the current ones.

In the coming months, the government will seek new lines of financing from international organizations and to establish an agreement with the IMF, but not everything will be easy. The IMF bureaucrats are in no hurry to close an agreement with Argentina, there are no major deadlines in sight and they prefer, for now, to wash their hands and postpone the agreement for later.

Argentina is in a hurry to lift the currency restrictions, but for now the stock of pesos is much higher than the stock of dollars. Reserves are negative and a large flow of dollars would be necessary to face a foreign exchange market without restrictions.

The government has already obtained the dollars to pay the interest on the sovereign debt that expires in January 2025. The amortizations will be paid through a repo operation, which will preferably be done with gold collateral, while they will develop a financial plan that would allow them to pay the interest for the entire year 2025 without resorting to external financing.

The economic team is confident that the money laundering and the moratorium will be a success, which will allow them to increase reserves, increase tax revenues, achieve a financial surplus until the end of the year and a drop in country risk in the same act. You can launder by buying financial assets and you do not pay the 5% fine, but you must remain bought until December 2025. It is a good opportunity to position yourself in Argentine bonds, especially AL35 and Bopreal 3. Properties could also move upwards. Although the offer is very large, the money laundering and the new lines of mortgage credit will help a lot, one bank offered a mortgage loan adjusted for inflation plus 4.0% per year, a bargain.

Conclusion

There is a headwind from abroad, but the Government has outlined a plan to easily deal with external turbulence.

It is a good time to position yourself in sovereign bonds and properties, due to the greater demand they will have to avoid the money laundering fine.

We don’t see the dollar above the $1,400 zone for the alternative currencies and $1,500 for the blue dollar. The government continues to withdraw pesos from the market. Don’t look at the reserves, look at the pesos.

The tax collection gave a bad signal, in July it rose by 233.5%, while we estimate an annual inflation of 258.9% for the last 12 months. Taxes sensitive to activity, such as VAT consumption, were located with an increase of 216.7% annually, check tax rose by 241.7% annually and personal contributions by 228.8% annually. The contribution of the country tax was $ 698,350.6 million, it will be difficult to recover that money with other taxes when it is eliminated.

The government has a titanic task ahead of it. It will be necessary for inflation to continue to fall, for the money laundering and moratorium to be successful, for it to reach an agreement with the IMF and lift the restrictions. It is not a small task, but it is not impossible if the private sector supports it and begins to invest.