Why the dollar goes down and country risk increases

In April begins to arrive the harvest dollars, we have before us 48 million tons of corn and 53 million tons of soybeans, both measures could be overcome. The average price of maize could be around USD 130 per tonne for soybeans of USD 210 per tonne, giving negative price forecasts. The total amount for sale would be approximately $ 17,370 million. If half of this amount were paid in July, we would have a foreign exchange income of approximately $ 8,685 million.

The government has received the loan from the IMF and the reserves will rise to about 77,000 million dollars. As of April 15, the National Treasury will start selling $ 60 million a day, until July, it would liquidate $ 4,200 million.

From today until July, the foreign exchange market would receive an offer of 12.885 million US dollars. This would bring the market a tranquility and an exchange rate that should not increase sharply, but should rather accompany monthly inflation, starting from August beginning.

We note however a very shaken securities market. Markets perceive the presidential election of 2019 with suspicion, two opposing projects are diametrically opposed and, if the winner does not have any external financial badistance, it is difficult to honor the debt maturities.

In this scenario, many investors sell government securities and issue dollars abroad. This leads to a fall in bond prices which translates into an increase in country risk. The risk rate is 830 points, which means that the average of our securities is 8.3% higher than that of a US security. With this risk rate, there is no investment and the economic slowdown accentuates.

Investors, in a capital exit scenario, choose to protect themselves in the domestic market by buying dollars. The battle between the market and the Central Bank is total.

The central bank is seeking to raise interest rates so that investors are demanding pesos and not dollars, ignoring the fact that anyone looking to buy dollars is doing it for fear that the worst will happen, and not as an option. investment. In this scenario, the key rate, set as the leliq yield is 67% per annum, the bank proposes a fixed rate of 50% per annum, the projected inflation is 40% per annum and investors continue to buy dollars because the demand is irrational, it does not seek to maximize returns, but to protect itself from the worst that could happen, namely a cessation of payments and a restructuring of the debt.

In the midst of this scenario, badysts suggest that a measure similar to that of 2001 could be taken to the market to correct bank deposits, before the exit of deposits or a significant increase in the dollar. Nothing foolish than this information, Argentine banks enjoy great strength and there is no reason to make deposits, pesificar dollar deposits or make withdrawals. Who speaks of corralito, is fantasizing about something that happened when the economy was bimonétarienne in 2001 and that today the financial system is a single currency, he accepts dollar deposits that can only be loaned to companies that generate dollars, as exporters. As a result, the strength of this financial system is greater than in 2001, we are in compliance with prudential standards and financial institutions are more capitalized.

conclusion

. – The rise of the dollar is favored by the possibility of likely political changes in the conduct of the country and not in the possibility of investing in different financial badets.

. – It is essential that Argentina continues to be granted credit to meet its debt maturities, otherwise we will have serious liquidity problems.

. – Without external credit, the economy will adjust via a large devaluation, which will allow to obtain dollars via the export market, whether it's about goods or about services.

. – The country has obtained a loan of 58 000 million USD from the IMF, whose term begins to run in 2022 and gradually until 2024. In 2020, there is no money. significant maturity of the debt and maturities of the 2019 debt are fully hedged.

. – The Argentine political clbad should lay the groundwork for defining unalterable state policies in the event of a change of government.

. – In the current context, we will have a dollar much demanded as a value guarantee, as well as the goods or the purchase of properties. The polls will mark the economic situation, it will help a lot to define the candidatures, the proposals and to know the result of the elections of August 11 which will give an indication of what can happen October 27 and November 23. There is still 9 months left for the end result, it's almost a delivery, where volatility will send to the market.