Argentine reserves closed on July 7 at US$ 42,218 million, it is a very meager sum if we take into account that the monetary base on July 5 totals $4,239,681 million and the stock of leliq and passes totals $6,434 .232 million. In this way, the Central Bank’s liabilities add up to $10,673,913 million, which, if compared to reserves, gives us a balanced dollar of $252.20. Don’t worry, this can get worse as the days go by.
In the last 12 months, the Central Bank issue amounts to $2,521,712 million, which shows us that monetary issue is being used to cover 100% of the expected fiscal deficit.
The government has made the decision to close imports until further notice, but knows that it cannot maintain this decision for long. The Central Bank will seek to limit the outflow of dollars anywhere, its policy is merely repressive, there are no incentives for those who wish to invest in the country, there are no tax benefits, no differential exchange rate, everything is put put.
The results of the repressive policy of the Central Bank are in sight, the stock dollar is worth $279 and the cash dollar with liquidation $296. A 90-day bill from the government yields 76%, while a bond in pesos maturing in October 2023 yields 87% per year. Bonds in dollars are horrible, the AL30 yields 46.8% per year in dollars and AE38 yields 30.0% per year in dollars. This makes it difficult to regain trust.
A separate issue is the instruments in pesos adjusted for inflation, at 3 months they yield inflation plus 0.5%, at 11 months inflation plus 9.6% per year, at 14 months they yield inflation plus 12.5% per year and at 24 months inflation plus 16.2% per year. These returns are also very high and difficult to meet in the future.
Argentina continues on the path of fiscal deficit, aggravated by a political crisis of unknown dimensions, where the permanent rumors within power mean that investments remain absent from the economic scene.
Radiography of the economy
In September 2020, the public debt in dollars with the private sector was restructured, the result was that the new securities are listed at less than half of what they came to market and no financing was obtained from this operation. The presidential elections of the year 2021 left as balance a defeat of the ruling party, high fiscal deficit and an increase in the debt in pesos. The agreement with the IMF came to calm local inflation, the result is that inflation is heading towards 3 digits, bonds in pesos are no longer a desired investment, and the State is unable to finance itself in any currency, resorting excessively to the monetary issue.
The external sector smiles at us, the prices of the raw materials that we export reached record levels, today they are going through profit-taking, but no one rules out that they could recover. Despite having the highest terms of trade in all of economic history, with record exports, the Central Bank loses reserves and they do not reach 10% of GDP.
Conclusions
In a context of high political uncertainty and scarce reserves, Argentina shows undervalued assets, from urban properties, fields and companies on the stock market.
The set of companies listed in the Merval Alear index, Banco Francés, Banco Macro, Byma, Central Puerto, Comercial del Plata, Cresud, Cablevisión, Edenor, Grupo Financiero Galicia, Holcim Argentina, Loma Negra, Mirgor, Pampa, Supervielle, Telecom , Transportadora gas del Norte y del Sur, Transener, Ternium, Grupo Financiero Valores and YPF, together are worth US$ 14,340 million, valued at the MEP dollar. This implies that our companies are at a gift price, for example, Petrobras Brasil is worth US$72 billion on the stock market and Mercado Libre US$35 billion, this clearly shows the risk we have and how State policies have devalued the value of our companies, let alone our daily lives.
In the path of restrictions, the government advances to intervene in the tourist dollarthe deficit in the balance of tourism in the last 12 months amounts to US$ 3,564 million, and in recent months spending abroad totaled more than US$ 400 million, with one tourist dollar to MEP dollar for trips abroad will decrease, however the $ 280 will not prevent the ABC segment from traveling, they only block the exit abroad of the middle class that vacationed in neighboring countries, those who planned to travel to the World Cup, will do the same, and the bleeding does not stop.
The government wastes energy putting restrictions, when it has to put a claw in eliminating the fiscal deficit, something that it does not even think about. The economy minister does not have the political endorsement of the ruling coalition, with the passing of days she becomes a transition minister. In such a conflictive and changing scenario, it is best to continue building defensive investment portfolios. Investors are bored of buying dollars or fixed-term UVA, perhaps it is time to buy other assets, for example, Grupo Financiero Galicia later than never is worth the same as the alternative dollars, but today its price is at $196.70 and the MEP dollar at $280, that’s where it’s good to throw a token and diversify in this company or others, that’s why the merval index has risen so much in recent days.
Source: Ambito
