The newly elected president of the United States, Donald Trump, carried out his campaign with a strongly protectionist bias, although it is understood, it is part of his imprint, the tariff issue will be a key issue in the multilateral negotiations of the Northern country. To contextualize, The United States represents 8.51% of Argentine exports, and 10.45% of our imports.
On the fiscal issue, expansive policies are expected, carried out with tax cuts. While, in monetary terms, greater orthodoxy, hand in hand with less pronounced rate cuts, in order to strengthen the dollar.
There will be a bidding exchange rate, given by increases in sovereign debt in dollars, and pressures on the exchange rate as a result of contagion by the region’s currencies. Let us remember that Brazil devalued strongly these weeks.
A geopolitical look after the elections in the United States
The withdrawal of arms support from the USA towards Ukraine puts a cold shoulder to its entry into NATO and generates a potential de-escalation of the conflict. This could directly affect the commodity price.
Recall that Ukraine’s main exports are corn, seed oils, wheat, etc. This is important since it could have a direct impact on Argentina’s trade balance. He corn is 10% of total Argentine exports, and the wheat 3.1%.
The local plaza also celebrated the results. The average sovereign debt in dollars rose 1.35%, the country risk fell 6.54%, the exchange rate fell by 1.37%, and the MERVAL in dollars rose 5.3%:
What are the financial markets seeing?
The United States has 16.51% of the votes in the IMF, since it is the main contributor to said institution. The good relationship between the president-elect and the Argentine president encourages the idea that a quick agreement can be reached with the IMF. There is a clear need on the part of the North American president to strengthen the bond with his main geopolitical partner in Latin America. Clearing doubts about the ability to pay the debt is key for our government in order to solidify financial stability.
While it is true that an international organization is not the one who pressures a default, restructure the agreement with the Fundin a way that alleviates the obligations contracted for the coming years, would substantially improve Argentina’s credit profile.
Added to this, the imaginary unconscious hopes that Trump’s victory, facilitate immediate disbursement of fresh funds that allow progress with the lifting of the stocks. Which is not necessarily a wishful concept, but rather, quite credible.
The “Arriazu Plan”: the conditions to lift the stocks on the dollar
Although it is true that the economic team declared that they are thinking of carrying out the “Arriazu Plan”which consists of reducing the devaluation rate to break the inflationary floor of 2% monthly, this scenario presents a favorable scenario for exchange unification, in which an international credit would allow the processes to be accelerated.especially thinking that we could see three consecutive months of inflation around 2.4% – 2.9%, thinking about October, November and December of this year. Let us remember that this is the first condition to lift the trap.
The second is that the monetary base converges to the broad monetary base, which I think I see going in that direction when analyzing the Treasury debt roll overs, where it reduces exposure in the market, lowers the stock of LEFI, and those pesos go to stock market collateral or private credit.
And, thirdly, the regularization of commercial debt that could be achieved with the issuance of a new BOPREAL.
This way we get to the last question: How do we cover ourselves in this scenario?
Investments: how to hedge against risk, after Donald Trump’s victory
Although sovereign bonds still look attractive in this context, I do not see that it is the right time to build a position, although I would always leave a crazy percentage of my portfolio, being in this context no more than 15%. I still see appeal in BPY6D, with a 9.97% yield. The star of the fixed income market today is the unsecured promissory note segment.
The risk analysis of the counterparty in the hands of a professional is essential, but by carrying out due diligence there are very good opportunities to generate value under these instruments. Today there are annual nominal rates above 55%, without the need to go beyond 30 days of investment for the peso curve, while in the dollar part we can find placements ranging from 6% to 20% .
Source: Ambito
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