the projections of Ecolatina for december

Ecolatina, a consultancy firm, predicted that in early December, the Leliq rate would reach the "floor" of 60 percent, in a scenario where demand for dollars could increase, but where "the rise in the exchange rate would be limited. ".

According to a consulting firm report released this week, "the prospect of a rate cut will also coincide with the second consecutive monthly decline in inflation expectations and the seasonal adjustment of the December monetary base (+7, 5%), which would allow the Central Bank to inject pesos into the market to meet the larger needs of the month (bonus payment, vacation and start of vacation) ".

The tranquility of the exchange rate of the period is based – according to the work of the consultant – insofar as, on the one hand, the pressures will not be as strong because, for the moment, there are no "big agents" dollarized ".

The substitution of Lebac – its stock expressed in hard currency went from nearly $ 62 billion at the end of the first quarter to less than $ 2 billion after the last call for bids – from Leliq, futures contracts fixed and treasury bills, it took liquidity to the market to limit the likelihood of mbadive dollarization of portfolios. "

"On the other hand, although the nominal yield of the loans in pesos continues its downward trend, given the deceleration of inflation, we do not expect a fall in real terms. From a price hike that will rise from 5.4% in October to 3% in November, the real interest rate will reverse its negative sign in the last two months of the year. motivated by monetary tightening and recession, the place is "dry" pesos, "he adds.

It also predicts a decrease in capital flight, which means that the September trend will widen "when the leak will grow from $ 2,850 million on average monthly during the first eight months of the year to less than US $ 2 billion in this month. "

"Since the launch of the second agreement with the IMF, the exchange rate has declined by 11.3% and remains close to the floor of the Non-Intervention Zone (ZNI) .The interest rate has also been reduced by more than 10 pp against the mid-October peak (73.2%) ", he explained in his badysis.

"In addition, the Central Bank is on track to achieve its target of zero growth of the monetary base until June 2019 (with seasonal adjustments): this aggregate contracting nominally compared to the average of September, the monetary authority has land to ease the contraction bias of its policy (further lowering the nominal interest rate), "he said.

Projections for 2019

Ecolatina says that things will begin to change in mid-2019, when the election period is in its infancy, where "it is very likely that the exchange rate tensions will reappear (they can even be anticipated)".

"In this sense, the greater the chances of victory of a presidential candidate for the market-friendly presidential election, the better the chances of maintaining some exchange rate stability. Otherwise, we expect the currency to test the upper band of the non-intervention area.It will be seen in this case if the firepower of the monetary authority (sell 150 million USD per day, contracting 0.5% of the monetary base per day) would be in The deterioration of the international economic and financial environment is another factor likely to threaten the calm of the exchange rate, "says the consultant.

And concludes that "increased volatility in the exchange rate would increase uncertainty about the repayment of public debt (generating a bullish dollar and country risk spiral). While IMF disbursements cover next year's principal and interest payments, the new president-elect will receive little additional funding in 2020 and will have to start repaying the loan after 2021. Therefore, the next administration needs to negotiate with the government. Fondo has delayed the repayment of payments that exceed US $ 50,000 million in 2022-2023, in accordance with the current schedule. "

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