Successful financial businesses for the year 2024 are projected in pesos, since inflation in dollars could be 40% and leave a real loss in many bonds.
Argentina in the year 2023 had an inflation rate of 211.4% annually, and a devaluation rate of 356.5% annually, this implies that prices in dollars deflated 31.9% annually in dollars.
For the year 2024, the average analyst estimates inflation of around 250% annually, while the devaluation rate could be around 150% annually.
The example is simple, if we take US$ 100 as of December 2023 we would have the sum of $80,805, if we apply an estimated inflation of 250% to this, by the end of 2024 adjusted for inflation it would give us a sum of $282,817 ,5. If the exchange rate increases by 150%, the value of US$100 by the end of the year 2024 would give us $202,125. This would result in inflation in dollars at the end of the year being 40%.
To summarize, we would have that inflation in pesos for the year is projected at 250% annually, while in dollars at 40% annually.
In this context, if I invest in financial instruments that adjust for inflation, I could have a profit of 40% in dollars. While if I invest in dollar instruments with rates lower than 40% I would be losing against inflation in dollars in our country.
At this point we must be very clear, if I invest in inflation-adjusted pesos I have many chances of beating inflation in dollars, however, if I invest in negotiable obligations I would be losing against inflation in hard currency.
Business and financing
For companies that want to take out credit financing in pesos at a nominal rate of 140% per year, this implies an effective rate of 276% per year, this results in a positive rate of 26% versus an inflation of 250% per year in pesos. If I measure it in dollars it would be a positive rate of 50% in dollars.
If I take out a loan in dollars at a rate of 6.0% per year, I am obtaining a loan at a negative rate in dollars of 34% per year.
It clearly changes the way credit decisions are made in the market, where credits in dollars are more beneficial than credits in pesos.
Conclusions
. – For fixed income, it is much more convenient to buy financial instruments in pesos that adjust for inflation, than instruments in dollars that pay a fixed rate. With an inflation of 40% in dollars, it is necessary to consider very carefully whether it is convenient to buy bonds in dollars, including the AL30 bonds that yield an internal rate of return of 37.1% annually.
. – To measure investments in pesos versus investments in CCL or MEP dollars, the advantage for investment in pesos is much greater. If we estimate that by December 2024 the gap would be 10%, the CCL dollar would increase by 130.0% during the year, while the wholesale dollar would increase by 150% and inflation by 250%.
. – Clearly in 2024 the investment will go through pesos adjusted for inflation, vastly surpassing investments in the linked dollar, MEP dollar or CCL dollar.
. – For those seeking to take on debt, it will be best to take financing in wholesale dollars, renting bonds, and in no way financing in pesos at effective rates greater than 150% per year, or nominal rates greater than 96% per year.
. – Surety rates at 90% per year are a good instrument, however, sureties have been made in dollars at rates between 0% and 3% per year. Promissory notes tied to the evolution of the wholesale dollar at 0% or negative rates are very attractive for companies.
. – From the Massa plan to the Milei plan the behavior of the financial market changes, if the music changes the pace must be changed, the same thing happens in the business world.
Source: Ambito
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