The dollar balance is very complicated, we will pass data from the last 12 months from May 2021 to April 2022. The trade balance leaves us with a positive balance of US$14,117 millionthe balance of services a deficit of US$6,776 million. Interest, dividends, remunerations, capital and financial transfers result in a deficit of US$9,227 million. The final result is that the balance of dollars in 12 months leaves us with a negative result of US$ 1,886 million.
Some numbers to highlight are the scarce foreign direct investment that adds up to just US$ 734 million in one year and the balance of the tourism balance that is negative in US$3,253 million.
The Central Bank of the Argentine Republic is making efforts to limit the increase in credit card minimums, thus hindering Argentines from going abroad. A ticket abroad adds a little more than $400,000 per person, banks limit credit to their customers so that, if they travel, they have to pay in cash. However, in recent months, the consumption of the card in dollars has multiplied by 3, which shows a growing flow of trips abroad. More problems for the Central Bank, in November the World Cup begins and the drainage of dollars would speed up remarkably.
The economic sector that contributes the most dollars to the Central Bank is the countryside, whether due to the export of cereals and oilseeds, such as food and livestock, among others, it contributes a whopping US$44,523 million, if we did not have a global context of international prices at record levels, the Central Bank would have already been stripped of foreign currency a year ago. The terms of trade of our country are the highest in history, the prices of our exports grew notably versus the price of imports. Soy is Peronist, this administration was very lucky with the streak of rise in the price of grains.
The Central Bank tries to contain the price of the wholesale dollar, the IMF allowed it to actively intervene in the futures markets, that is why it is our guide on what can happen in the month of June. Since Miguel Pesce arrived at the Central Bank, he has never had a loss in the intervention in the futures market, he has always set dollar futures prices above the value of the currency at the expiration of the operation.
The price of the future dollar on June 30 is $125.47, the difference against the closing price of the wholesale dollar on May 31 is 4.4%. This would imply that the wholesale dollar in the month of June would not exceed said mark, and it is even highly probable that it will be below this figure.
If we estimate a 4.2% devaluation for June, which is the same as the official dollar increased in May, we could say that inflation would have a floor around that value, while the ceiling will be set by the expectation of increase in prices in general. Inflation of more than 5% is expected for the month of May, everything indicates that, if we enter June with a floor of 4.2%, having inflation of more than 5% again is highly probable.
To make an investment in pesos, the fixed term UVA looks interesting, every three months it is giving a very high return, for example, between March and May the UVA increased 17.8%, between April and February 14.2%, between March and January 11.6%. This is the difference between the value of the UVA index reported by the Central Bank. We believe that between the months of April and June it will be giving a rate higher than 17%. Looking to the future, between June and August the rate that could be obtained would be between a floor of 15% and a maximum of 16.5%.
With the lack of dollars in the country, and the scarce reserves, it is likely that the MEP dollar will begin a process of significant rise. As of December 31, 2021, the MEP dollar was worth $197.80 and as of May 31, it traded at $207.67 with an increase of 5.0%, in the same period of time the UVA index rose 25.5%. Clearly UVA fixed terms are taking a significant advantage over the evolution of the MEP dollar, however, the revenge could be just around the corner.
If we take the period of one year, the MEP dollar rose 30.2%, while the UVA fixed term rose 56.8%, this clearly shows a significant delay in the price of the dollar compared to an investment alternative tied to inflation.
However, if you want to take advantage of an investment instrument that will give you a very good return before the 2023 presidential elections, it seems to us that the bonus AE38 it’s very attractive. First of all, we should say that 2/3 of its emission is in the hands of the Statewith which the floating portion of bonds in the market is scarce, which means that the price is not so volatile.
The bond is worth US$32.12, before reaching the 2023 presidential elections the bond pays interest coupons for the equivalent of US$4.875, this implies that you collect a rate of 15.2% in dollars before the elections. The investment is recovered in July 2027 by collecting rent and amortization coupons.
If a pro-market president wins, with the political will to achieve a fiscal surplus and, within two years, lift the stocks, this bond could be worth at least 50% by December 2022, which would represent a capital gain of 55.7% in dollars.
If a pro-market president does not win, this bond would surely continue to be paid in the following months, but in 2027 it would begin to pay amortization and it would be difficult to honor that debt if the country continues with stocks, with which a new restructuring would be likely, in such a scenario we do not see the bond falling from current values.
In conclusion, we believe that the worst for the bonus AE38 It’s over, the coupons to collect make the bond attractive and the arrival of a pro-market president can inject great utility into your portfolio, if you have this title.
The bond can be guaranteed (take money with guarantee of the title). They give you up to 80% of the value of the title in the market in pesos at a rate of 40% per year, take this money and place it in a UVA fixed term, which for the next 360 days could leave you with a return of more than 80%, no It seems like a minor difference to make the vice stand out. The mix of what you pay for the surety and what you receive net of omissions can leave you with an additional profit of 30% per year.
Summary
The mix of investing 50% of the portfolio in dollars (it can be dollar bills or private negotiable obligations in dollars that yield approximately between 3% and 6% annually), 30% in instruments in pesos adjusted for inflation (preferably fixed terms UVA) and 20% bonus AE38 does not seem unreasonable, in the face of opinion polls that today mark a shift to the right in society and the desire for the next president to lower inflation levels and eliminate the stocks. Invest in 2022 to monetize in 2023.
To invest in Argentine stocks, we recommend companies linked to raw materials, leaving the percentage to invest to your will given the high volatility of these instruments.
Source: Ambito
