Many believed that the economy would return to normal almost immediately. But there is still a long way to go.
After the Honorable Chamber of Deputies of the Nation approved the Tax package laws and basesmany believed that the economy was going to normalize almost immediately. But many of us knew that everything was much deeper than a couple of laws and the cause is directly the real lack of reserves in the BCRA together with the impossibility of obtaining them abroad under the current circumstances.
In fact, before the International Monetary Fund is that they asked him for some basic points to grant him a new credit/disbursement of fresh funds, in what they requested are: 100% depreciation of the currency taking the exchange rate to $ 1,800 – US$ 1 (exactly the same that they ask from the countryside to export and liquidate these operations, since since the depreciation of 12/12/2023 that is the number resulting from inflation after subtracting the 2% monthly microdevaluations carried out until today), positive interest rate for that the pesos do not leave the financial system to seek refuge in the unofficial exchange rate (for this they set a nominal interest rate of 4.25% vs. the last CPI of 4.2%) and restore profits to the workers (just as they say achieved with the Fiscal Package).
Whereby, We can say that the Minister of Economy is studying devaluing close to 50% and bringing the ratio to $1,400/1,500 for each US dollar.. That devaluation alternative will almost certainly be the inflation You will eat it in a maximum period of 4 months; Well, the rest of the IMF conditions have already been met, at least for now, by the current administration. Even with that alternative it would not be enough for the multilateral organization to grant the disbursement and would require it to reach the 100% originally requested, especially knowing the urgency to have fresh funds in the BCRA.
Although many expected calm, the street is returning a very different reality since on the first morning of Friday both the country risk and the blue/free exchange rate were located at 1,432 basis points and $1,345 (down 13 basis points and $10 from Thursday, respectively); after midday and seeing the reactions of the street and the very strong possibility of judicialization concomitantly with shady maneuvers to obtain the number of votes in the Chamber of Deputies, it began to react returning to the initial 1,445 points and $1,355 of the day and later rising to 1,468 and $1,365, so despite the fact that a statement from the IMF spokesperson was issued celebrating the approval of both laws, the market is expectant and predicts a new devaluation of the peso that will bring it closer to the expected values of $1,800. The problem is that it would be a new devaluation just for the sake of devaluation and without providing any help to the most vulnerable sectors.
By most vulnerable sectors we are talking about retirees and pensioners, the disabled, slums/emergency neighborhoods, community kitchens and/or neighborhood clubs, as well as the protection of those who took out loans in Purchasing Power Units in the period 2016-2019, which to date have accumulated updates close to 5,588%. Let us understand that during the month of June, the BCRA ended with a negative reserve balance of US$ 84 million compared to last May, that is, it did not accumulate because it sold more dollars than it bought.
As for what was being seen, it was known that the Minister of Economy was going to make announcements and that was crystallized with the announcements at 5:45 p.m. on the same Friday.
Only with the announcement of the press conference on monetary policy did the country risk drop to 1,456 basis points. But it ended up being a blef since what they pronounced as announcements for what is coming and ended up whitewashing the game they have been playing between the BCRA and the National Treasury for the bills (which are neither more nor less than the liabilities of the BCRA balance sheet). transferring it from the first to the second with a rate higher than those of the BCRA. Regarding the EXCHANGE CEPAL issue, they did not propose an exit date for it, therefore everything will continue as before today in terms of the exchange rate and country risk with the same levels of pressure as until today and clearly rising. On Monday we will see the reality from 10-11 am that day, since what they did end up recognizing is that inflation is multi-causal.
Economic and tax analyst
Source: Ambito
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