He macro regime change promoted by the Minister of Economy, Luis Caputo, which started in December had key implications at various levels. The consolidated public sector debt is an especially important one because of the consequences it has on the rest of the macrofinancial variables.
In the analysis of the progress in the cleanup of the BCRA’s financial status, There are two conclusions: i) in the first six months the BCRA improved the quality of its balance sheet and their leverage ratios (even increasing the level of their liabilities measured in dollars), and ii) part of the improvement was explained by transfer of BCRA Passes to Treasury Bills (Lecaps), which is neutralized when we look at the consolidated debt.
But in this column we will focus attention on the direct effects (debt transfer) and indirect effects that the macro strategy had on the National Treasury debt.
The stock of debt in Treasury pesos increased around US$75,000 million to the CCL since last November. About US$20.7 billion are attributable to direct effects (net emissions, where the deficit is almost zero), while the rest (US$54,000 million) are indirect effects of macro policy which, together, can be summarized in the impact produced by the real appreciation of the exchange rate (inflation in dollars).
The stock of debt in pesos has multiplied by just over two since November 2023. With the current level of international reserves, The impact of an eventual portfolio dollarization would be more acute. In other words, the exchange front became more vulnerable to a reversal in the demand for assets in pesos.
There is a mitigating factor for the risks that this panorama presents: the composition of the holders of that debt.
As of last March (last date for which we have complete data), the financial sector (US$16,735 million) and public sector agencies (US$29,627 million) had “financed” practically the entire variation in the national Treasury debt (US$44,447 million). This is important because These two sectors are less prone to a sudden change in appetite for dollar assets. Having said that, the fact that the “rest” has not accumulated debt in pesos since that moment (in fact, measured in dollars, it fell to US$1,915 million) is telling us that The capacity to absorb private and external sector debt is close to its maximums at these levels.
Dollar: the path to the end of the stocks
When President Milei says “If we solve the problem of puts (liquidity insurance for banks), bye” He is referring precisely to this point: that exchange restrictions have not yet been removed due to excess pesos, not due to lack of dollars (which are also scarce).
Even though we are optimistic about the firm hands that the stock has today (financial sector and public sector), the most delicate problem is at the margin. To illustrate the point let us consider the situation where the stocks are opened. Then It is expected that there will be a dollarization of portfolios.
The natural response of the BCRA should be to raise the interest rate. But due to the existence of puts, this tool is limited: if the interest rate rises, the price of the bonds would be pressured downwards and in that case, the puts are activated. In other words: If the interest rate rises, the puts are activated and there is more money in circulation in the market, fueling dollarization.
The balance remains very delicate. Faced with this context, we do not see that the release of the stocks is imminent. Despite clear progress in fiscal and external matters, The lifting of exchange restrictions will be, at best, gradual.
Consultatio Investments Strategist
Source: Ambito
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