The Government seeks in Washington a new financial aid to reinforce reservations and contain the dollar, amid increasing doubts of the market about the sustainability of the plan.
While the Argentine economic team Negotiate a new assistance package in Washingtonthe markets observe carefully, aware that the result of these treatments will be Key to define the sustainability of the local financial plan and the government’s ability to stabilize the dollar and Honor debt maturities of 2026.
The Argentine Economic Team He returned this weekend to the US In search of a second assistance package in just six months, a reflection of the persistent macroeconomic fragility facing the country. The crisis, triggered by monetary policy errorshe Failure to comply with reserves with the IMF and the recent electoral defeat in the province of Buenos Aireshe left the government without margin to stabilize the economy without external support.
In April, the IMF approved a program for US $20 billionof which 12,000 million were disbursed immediately, with another 2,000 million and contributions from multilateral organisms. These funds The Central Bank reserves (BCRA) pointed outhoping to shield it in the face of exchange volatility. However, The strategy failed to contain the pressure on the dollar nor avoid a new crisis of trust in markets.
A temporary help with uncertain conditions
The economic panorama deteriorated quickly. According to him Monthly Economic Activity Estimator (EMAE)indicator that the INDECthe growth stagnated in February, and the PBI fell 0.1% In the second quarter. The Country risk risedriven by the collapse of sovereign bonds, and Dollar climbwhich reached the ceiling of the exchange band, forced the BCRA to Sell US $ 1,100 million in three days To contain the run.
A recent message from US Treasury Secretary, Scott Besenttogether with the Temporary elimination of retentions to agriculturegenerated a Brief relief in marketsalthough ephemeral. The Argentine treasure, which accumulated just US $ 1.8 billion of US $ 6.3 billion liquidated by the fieldstarted selling currencies on Tuesday, liquidating US $ 644 million in 48 hours to hold a “subtect” exchange around $ 1,425 per dollar.
Negotiations with Washington revolve around a Possible coin swap for US $ 20,000 millionBesent said. This mechanism, which implies a Exchange of currencies to reinforce reservationsit requires a specific activation – as happened with the Chinese swapwhere of US $ 15,000 million only $ 5,000 million were available. The uncertainty persists On what percentage of this new package will be available immediately.
Javier Milei and Scott Besent.jpg
The immediate objective of the government is soothe the pressure on the sovereign bonds and the dollar. Fresh funds are crucial to face the maturities of January and for intervene if the exchange rate exceeds the band’s roof. However, as demonstrated by the Previous rescues (US $ 50,000 million in 2018 YU $ 20,000 million in April of this year)these injections They provide temporary relief, but do not solve structural problems.
The background challenge: return to the voluntary debt market
The long -term solution goes through Recover access to the voluntary debt marketwhat demands lower country risk, order the fiscal accounts and restore monetary credibility. A BCRA with genuine reserves It is a necessary condition to generate trust.
For a good part of 2024, the accumulation of reservations coincided with one country risk fallbut the recent policy of not buying currencies and Cross Treasury and BCRA interventions to hold an exchange rate that The market does not consider sustainablethey lit new alarms. To this is added the fiscal cost of US $ 1 billion for the elimination of retentions.
He Exchange band regimewhich limits the flexibility of the dollar, It aggravates the tension. US Treasury dollars could be rapidly absorbed by private demandat a price that today does not reflect the balance. A transition to a more flexible scheme could reduce the need for expensive interventions, but It implies political and economic risks In the short term.
A respite or an endless cycle?
Since 2018, the Financial Assistance Packages Already total s 70,000 millionallowing Argentina win without solving the bottom of the problem.
While the government Negotiate in Washingtonhe Market observes skepticism. Without a Comprehensive plan that combines fiscal discipline, monetary order, accumulation of reserves and a sustainable exchange regimehe Today’s relief could become the crisis tomorrow.
Economist
Source: Ambito
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