The scenarios for the dollar, bonds and stocks, depending on what happens with the law Bases

The scenarios for the dollar, bonds and stocks, depending on what happens with the law Bases

The Argentine economy in 6 months shows a fiscal surplus, a drop in the stock of money in circulation, less inflation and a substantial drop in country risk. Greater order has been achieved in public accounts. However, better collection of taxes linked to economic activity (consumption VAT and check tax, among others) was not achieved, which raises a question mark for the future.

Regarding investment, it is clear that foreign investment will not come, that Argentines will have to make investments if they want the country to grow. We have not managed to place a bond abroad, and we have not obtained help from multilateral organizations to strengthen the Central Bank’s reserves.

The Central Bank of the Argentine Republic continues to show weaknesses, reserves have not reached the necessary height to clear up doubts in the market. We continue with a large monetary liability in pesos and dollars, a growing debt in terms of imports, and few export settlements to swell the reserves. In this context, we are weak.

An issue that confuses the business community is what monetary and exchange rate policy the Central Bank will adopt in the future. In principle, it would not have the dollars necessary to dollarize the economy, as was the case in Panama or Ecuador. A scheme of coin competition It also seems complex, firstly, because there are not enough dollars to lift the stocks, secondly, because the issuance of pesos must be prohibited and everything is in the hands of endogenous dollarization (the dollars leaving the mattress).

On the other hand, a reform in the financial system should be carried out, which includes an increase in reserve requirements and a positive interest rate against inflation. If dollarization or currency competition is not achieved soon, it should be clearly defined which system we are going to adopt, whether we are going to a currency board or whether monetary policy is left to the free will of the monetary authority. We believe that at this point there is a lot of confusion, and economic agents certainly do not receive a monetary and exchange policy path to carry out, all of this generated uncertainty, and consequently an increase in the gap between alternative dollars and the wholesale dollar.

With data as of Friday, June 7, the importing dollar stood at $1,056.4, while the CCL dollar stood at $1,313.0, here we have a gap of 24.3%. Those that left the Free Exchange Market and import with the CCL dollar will be increasing the value of imported products, which may bring more inflation in the preceding months.

The export dollar is located at $981.9, while the MEP dollar is located at $1,282.3, this implies a gap of 30.6% that distances grain producers from liquidating the production of soybeans, corn or wheat. For example, the FOB value of soybeans is US$498 and the producer receives US$226 MEP out of pocket, this implies a reduction of 54.6%.

In the case of corn, the FOB value is US$195 and the producer receives US$129 MEP out of pocket, this implies a reduction of 34.0%. In the case of wheat, the FOB value is US$294 MEP, this implies a reduction of 37.2%. With these reductions, the producer prefers not to liquidate, to retain the inventory, and if he needs money he goes out to take out financing at rates lower than 30% annually, when the expected inflation 12 months ahead is 70% annually.

The low interest rate policy did not achieve the expected objective, the market mostly takes them to finance inventory, and not to boost business. We do not wish to be totalizers, we know that many companies have taken advantage of the drop in interest rates to refinance their debts, and reduce monthly structural expenses, but in many cases it was used to finance stock.

This is a serious mistake, but many consultants continue to suggest policies similar to those adopted in a Kirchner government, while living with a government that has an economic policy that is committed to greater productivity and competitiveness. This will cause problems for more than one entrepreneur. From our point of view, financing must be taken to improve processes and incorporate capital goods, financing inventory is not a mistake, it is a horror.


. – After 6 months of Javier Milei’s government, the biggest deficit is in parliamentary management (he did not pass a law) and the State (the scandal in the Ministry of Human Capital). Firing the chief of staff was also a bad sign.

. – The capitalization of the Central Bank is delayed, and this brings us a severe problem in expectations, since economic agents do not invest, retain, finance the inventory with credits at low rates, and do not prepare for the productive change that is coming. .

. – We have a window of time in which we are going to live with negative interest rates in both pesos and dollars, it is a suitable time to go into debt, and invest in process improvement, such as the purchase of capital goods to enhance the productivity and competitiveness of the companies. companies.

. – In less than a week we will know if the Bases law is approved, if the government achieves this law, even if it does not turn out as dreamed, it will be a great advance to be able to receive more investments, improve public accounts and capitalize the Central Bank.

. – In 90 days we need to go to the market in search of capital, to be able to refinance the maturities that we have from today until December 2025, which would total US$ 17,500 million.

. – If everything is a success, the rise in the dollar will remain in the past, while sovereign bonds will be outstanding, and bonds in pesos adjusted for inflation will show a greater rise than that of alternative dollars.

. – If what has been stated up to here is a failure, let us not rule out a growing gap, economic contraction, fewer liquidations by exporters, greater demand for imports and inflation that will begin to destabilize the economic program.

Financial analyst

Source: Ambito

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