What can we expect for the future, can it continue going down or are we already in the flat area? The truth that the dollar continues to decline in the midst of an economy with inflation of 4% per month is not very sustainable. If goods and services rise at that rate every month, why wouldn’t the dollar, which is one more price in the economy? Today the $190-$200 is probably a floor range for these dollars. Being in that zone doesn’t mean that you can’t lose a couple more pesos or that tomorrow you have to start climbing immediately. It means that the decline is about to end and that whoever wants to reposition himself would not be paying an expensive dollar.
This is what has been lived up to now, but as always, the important thing is what is to come, the rest is history and the search for reasons. And what comes depends on different possible scenarios with more or less chances of occurrence
Let’s start with the most favorable. The government agrees with the IMF, lowers the deficit and complies with the lower emission. Lowering the deficit will allow the government to need fewer pesos, limiting the direct financing it can obtain from the BCRA will force it to take on more debt in the local market, absorbing money that today goes to leliqs and passes, lowering the amount of remunerated liabilities will help the balance of the entity and will have to pay less interest (which is another emission factor). All of this would end up resulting in a lower level of peso issuance, which would imply not only lower inflation for the second half of the year, but also a lower level of demand against the dollar. If all this happens, we could see a 2022 where the gap stops growing, in fact it has already dropped from more than 100% to 70%. The fall in the gap would be due to an official dollar growing faster than the financial ones.
The second scenario would be an agreement approved with the IMF but with partial compliance, in that case it will depend on the type of non-compliance incurred, but clearly we would begin to move away from the previous results. Confidence would still not appear, inflation in 2021 would be flat and the gaps would once again approach 100%.
The third scenario would be the agreement does not come out or that, due to the level of non-compliance, it falls in the first reviews. The current problems would deepen, the only source of financing would be the issuance of pesos with which both inflation and financial dollars would take a new impulse where it would be very difficult to estimate how far they can go.
The agreement with the IMF does not solve all of Argentina’s problems, but meeting the established goals will give us the basis to start normalizing the economy. As long as we do not achieve a fiscal balance or lower inflation to acceptable levels, any economic growth or stability will only be temporary.
Financial analyst.
Source: Ambito
