Next, the guru’s column:
The government achieved 8 months of fiscal surplus, honored the debt and adjusted relative prices. The consequence was that the dollar ceased to be a safeguard of value.
Argentine companies begin to place money in the market at very low rates. Grupo Financiero Galicia placed US$325 million over 4 years at an annual rate of 7.875%. Pan American Energy has placed a 2 and a half year negotiable obligation at an annual rate of 5.4%. A 10-year American Treasury bond yields 3.65% annually. Corporate risk is very low in Argentina.
The other side is the country risk, It is located at 1265 points. A sovereign bond in dollars maturing in 2035 yields 15.8% annually, and a bond maturing in 2029 yields 21.25% annually. They are very high yields. Sovereign bonds rise in parity or corporate bonds fall, I would lean towards the first hypothesis.
Meanwhile, the bleach add adhesions. He would have accumulated more than US$ 13,000 million in cash, when in Mauricio Macri’s laundering, only US$ 7,700 million would have been accumulated in cash. This money laundering is a success, it was not carried out for fundraising purposes, but to push the economy to reactivate. The GDP, measured at the latest dollar exchange rate, would be around US$400 billion. This implies that money laundering contributes more than 3% of GDP to the economy; clearly, we are going to feel its impact.
The banks show dollar deposits at record levelsexceeding US$30,000 million. This activates financing in dollars, which are then transformed into pesos to invest in the local market. In short, the sale of dollars does not stop, the Central Bank buys dollars genuinely, and reserves are still on the way to exceeding US$30 billion.
To the latter we must add the possibility of the government obtaining fresh funds via a financial operation in which guarantees (gold or bonds) are delivered against dollar bills that remain in the display case, only available in case of emergency. The rate that the government would have to pay would be around 5% annually, in this way it could obtain between US$5,000 and US$7,000 million. In this way, the ghost of summer would be cleared up, which is when financial crises occur in Argentina.
The main enemy of the economic team is the weather. On the one hand, it could collapse the energy system, but something that no one says is that the drought could leave a meager harvest in the Argentine countryside, which will mean that the flow of dollars to be received from exports will have to be replanted by the year 2025, consequently. the tax revenues to be generated via export duties. The drought is affecting the next wheat harvest, a little prime corn was planted. 100 millimeters are needed to be able to plant soybeans, and few are going to risk growing late corn because it could be affected by a pest that, like a magician, makes the crop disappear. The pest is popularly known as the leafhopper.
Conclusions
. – The United States is in stoppage time, on November 5 there are presidential elections. The president of the Federal Reserve could lower the short-term rate in November and December, leaving it at 4.5% by the end of 2024. By 2025 this rate could drop to 3.5% annually. Tailwind for Argentina.
. – Headwind. The climate is working against Javier Milei’s government, opening the doors to an energy crisis and a possible lack of dollars in 2025. All of this will have its impact on tax revenues. Zero deficit is a very good measure, when the economy expands, it is an accelerator, since any surplus is used to pay debt or lower taxes. When the economy contracts, the zero deficit is a handbrake, since it reduces expenses and we will have to tighten our belts. This must be taken into account to project 2025 growth.
. – In the short term, sovereign bonds in dollars are the best investment option. The president ensures a fiscal surplus, dollars are being used to pay the interest on sovereign bonds that mature in January. With this news, the country risk could drop to 1,100 points, and if some additional financing is confirmed, we will have the country risk at 1,000 points in a short period of time. Then, the government will decide whether to enter the voluntary credit markets now or in 2026.
. – Deposits in dollars exceed US$ 33,000 million, and reserves flirt with US$ 30,000 million. Soon, the financial ratios will be better than expected. Nobody expected so much good news together, the money laundering, the moratorium and the advance payment of profits.
. – All this good news was reflected in the price of the MEP dollar, which pierced $1,200, and a blue dollar that could continue to fall. Everything suggests that they will find a floor in the wide range between $1,050 and $1,150. Clearly, whoever bet on the dollar lost, a lot, inflation from December to September was 153%, and alternative dollars increased less than 20%. Those who reinvented themselves and bought financial assets won. We are watching over the dollar as a safeguard of value in the Argentine economy. Many will say don’t consider him dead, but empirical evidence says that whoever kept the dollars lost.
Source: Ambito
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