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Argentina becomes increasingly expensive in dollars. How to manage liquidity?

Argentina becomes increasingly expensive in dollars. How to manage liquidity?

In the midst of an economic panorama marked by volatility and uncertainty, Argentine companies face considerable challenges in managing their treasury. With falling but still persistent inflation, latent exchange risks, and with all options in pesos at negative real rate, the task of maintaining liquidity and protecting assets has become more crucial than ever.

In just over 100 days, the national government made great progress in correcting macroeconomic imbalances. Currencies have been purchased for more than US$10,000 millionthere have been two months of financial surplus and large adjustments have been made in relative prices.

Although these numbers are to the market’s liking, it is also true that foreign currency purchases have been made by postponing import payments (30, 60, 90 and 120 day scheme) and that the liquefaction due to inflation and the collection of country tax have contributed greatly to government surpluses.

In this context of declining inflation, a series of measures were taken by the BCRA that have implications for the management of the Treasury, namely: a sharp cut in interest rates, which would accelerate the improvement in the BCRA’s balance sheet numbers, once again moving yields away from positive real territory and extending the liquefaction process (TEM at 6.6% monthly vs. 13.2% inflation in February) and the elimination of the minimum fixed-term rate (going from 110% to levels in the 70% – 75% zone). All this encourages investors’ pesos to go from funds in banks to treasury securities.

A priori, the exchange rate did not react as one might expect to this rate drop, but the exchange rate delay continues to consolidate. Argentina becomes increasingly more expensive in dollars and it becomes less evident that this situation could continue ad-eternum.

Based on the above, to define what a company’s Treasury should do, we must seek to understand whether, with the fulfillment of these partial goals, the government will decide to advance to an exchange rate unification or if it prefers to wait for all the necessary conditions to be met, at risk. of accumulating an exchange delay that makes the exit increasingly more complicated.

If the first scenario occurs (unification before June) without a doubt the assets where we should be positioned are assets in dollars, since a unification will probably come hand in hand with a rearrangement of the exchange rate. We find them attractive:

  • For conservative investors, the Bopreales Series 3 (BPY26) with a return close to 15% per year in dollars.
  • For the most risky, the sovereigns (AL30, GD30) that, although they have risen a lot, still have an upside in a scenario where everything goes well and Argentina’s yields are close to those of comparable countries.

In the second scenario, where inflation continues to decline and the lifting of exchange controls is postponed for several months, it is likely that we will see new rate cuts. In this context it is convenient to search set rate (with short LECERES, ON Badlar, Checks and corporate Promissory Notes, among others).

As evident from the above, it is not easy to navigate this level of uncertainty, but a plausible strategy would be to think about the investment portfolio in two time frames. One short term, where we should overweight the interest rate and another medium term where we should have a more dollarized portfolio.

Source: Ambito

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