The government does not have an economic plan, it has only made it explicit that it wants to reach August 13 and, from then on, electoral expectations rule. The plan presented by the opposition is more important than the critical path of the ruling party until the handover of power.
In the current scenario, tax revenue and dollars are missing, everything is correlated by the same problem, “drought is the pandemic of the countryside”. Income from the agricultural business fell by half and production costs, plus land rent, represented 90% of normal income, producers are in the fifth hell. The bankruptcy of the field is suffered by the State through less income in dollars and a sharp drop in the collection of withholdings. This assures us a fiscal deficit, monetary issue, inflation and, therefore, an increase in the interest rate.
Economic activity is in a clear slowdown, according to data from the Monthly Estimator of Economic Activity (EMAE) as of March 2023, the economy grew 1.3% in the last 12 months, in the first quarter of 2023 versus the same quarter in 2022 it grew 1.5%. However, if we measure the statistical drag for the next 12 months, the results indicate a projected drop in GDP of 3.5%. From our point of view, we believe that we will be able to observe a higher drop, around 5.0% of GDP.
The field has little amount of soybean left in its possession. While, a year ago, the field had 26 million tons of soybeans to sell from the 2021/22 campaign, currently it only has 12 million tons left to sell. The poverty effect is enormous. There is little to sell and few dollars to earn.
Reserves are below US$ 33,000 million, total monetary liabilities are around $20 trillion, clearly the dollar is a good option as a safeguard of value. The MEP dollar is worth $460 and the target value of the dollar would be at $600.
It is interesting to analyze the behavior of the Merval Index, which is listed at US$ 694 but has a ceiling in the area of US$ 720/US$ 740, a price that has not exceeded since January 2023. The market He is waiting for what the polls say and what the opposition proposes.
Shares like YPF have a triple ceiling in the area of US$ 12.70 and today they are trading at US$ 11.33. Grupo Financiero Galicia has a ceiling of US$14.0 and is trading at US$11.78. We could cite many more, but most of them have not exceeded the highs of the year 2023. We are in an expectant zone. You can buy now and wait, or buy when resistance is broken.
The GD30 foreign legislation bonds reached a maximum of US$ 37.4 in January 2023, the AL30 local legislation bond reached a maximum of US$ 32.50. Currently these bonds are worth US$ 28.0 and 21.83, in good times the gap was 15.1%, currently 28.3%. Point in favor for the AL30.
If the opposition were to draw up an economic plan and contemplate balance in the public accounts, these bonds should be worth at least US$40.0, but for the moment, they are worth less than US$30, this implies that the market will not is interested in buying Argentina.
- The dollar bill has a way to rise and is always a good store of value.
- I don’t like investing in pesos, because the fixed term rate and Treasury bills is lower than the expected inflation rate. The investment in pesos that I like the most is the UVA fixed term, in its merry-go-round variant at 90, 120 and 150 days. Then everything is renewed to 90 days.
- Company Negotiable Obligations are a good investment, with average rates of around 9% per year, with highly rated companies and with maturities between 2024 and 2026. It is invested in pesos and you are paid in dollar bills.
- Bonds or promissory notes in dollars linked They are very boring, but they are going to explode in the year 2024, you have to go slowly, the gap would narrow in the future, not immediately.
- Sovereign bonds are the least attractive, given their high volatility, but the AE38 pays good income, it is a title to analyze, on the other hand, it has a small number of bonds in the market. The AL30 is a bargain.
- The actions are to be seen from the outside, if the Merval exceeds the level of U$S 740 the market will fly, it is worth paying the toll and buying when it exceeds said mark, since when this happens, we will be buying a ticket to the US$1,000. At present, we do not know how long the market may be trading below $740.
- Remember, this government did not have, has, nor will have a plan. All eyes will have to be on the opposition, who will be candidates, what plan they propose and who will carry it forward.
- In the short term, the State has a shortage of dollars and tax revenues, the two main reasons that generate high issuance, inflation, rate hikes and an increase in the gap. At a minimum, embrace the dollar, which is the lifeline of any investor.
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