BCRA is at a risky juncture

Virtual President Alberto Fernández made a generous contribution to exchange rate stability, pointing out that the dollar at 60 pesos was reasonable, accompanied by a belated intervention by the Central Bank.

The BCRA should have defended the ceiling of the feigned swap band of 51.45 on the fateful Monday of August 12th. Inaction has brought the retail dollar back to 65 and fueled an additional 15% inflation, bringing the dollar "equilibrium" to $ 60, while it could be at a level less than 52%.

The dollar of 60 is similar to the current values ​​(62) at the average level from May 2003 to October 2011 and is equivalent to the average dollar of the 60's. Of course, these reference values ​​correspond to the moments of our history, with a different context economic, regulatory and global, we must therefore consider them in relative terms.

It is true that this exchange rate generates a relative cushion, including expected inflation from August to October, if the trade war is not aggravated or if the "bad praxis" "Local is not thorough.

So, for the balance dollar to be more than a photo, a reasonable film, supply and demand for foreign exchange are needed, in addition to prices to stabilize. But we must not lose sight of the fact that the situation is very fragile and that there are risks of acceleration of inflation and a more serious recession. The financial and foreign exchange weeks will not be easy because of the explosive combination of economic imbalances, the global context and the loss of confidence.

The government does not have too many instruments. The interest rate is increasingly ineffective because of the country's increased risk premium, which makes the attachment to speculative capital less attractive. It remains 105 days before uncertainty is dispelled and a new government can make decisions, an eternity for the economy and society.

In these limbo between August and December, between a president without political force and a virtual president always cautious, the supply on the foreign exchange market will diminish and the demand for hedging will increase, which will generate pressure on the exchange. The agreement itself with the IMF limits the sales position on BCRA futures with which the government only sells to keep the exchange rate under control and meet the demand for ever-increasing coverage in periods election, much more. in an indebted country which, as Bloomberg has pointed out, "the most vulnerable in the world".

In the context and in the context of what the economy calls "the impossible trinity" (setting the interest rate, determining the exchange rate, in a framework of free movement of capital) baduming that the government will move forward no, more In addition to the declining foreign exchange position of banks in prudent foreign exchange regulation, the BCRA must accept some fluctuation in the dollar.

The problem is the magnitude of the flotation tolerated. BCRA is at the crossroads of two narrow and risky trails. You can not neglect the dollar price for which you have to sell reserves in order to avoid further devaluations and an inflation rush. Exchange rate stabilization can not deplete available reserves, in a market where the low level of liquidity reserves is monitored daily.

It will be crucial to see the degree of renewal of Letesin the last call for tenders, there was only short-term public sector renovations. Every day, the market will monitor the change in reserves by intervention, the renewal of maturities and the formation of external badets. The decline in dollar deposits and dollarized pesos will be seen in the spotlight. There is nothing left, baduming a weak income and a larger dollarization. In the best case, you arrive on crutches.

During these 105 crucial days in the final, it is very important to see what the IMF will do with the disbursement of 5.4 billion USD after the 15 September valuation. For the last review in June, the IMF took a month to disburse. If the Fund repeats this pattern, the funds would arrive on October 15 within 12 days of the election.

The IMF is grappling with a dispute that has led to being jointly responsible for an unsustainable program, having missed all projections for 2018 and 2019. The June targets were "formally" filled with some deviations, but the situation deteriorated in July and August. If the IMF frees the funds, it risks fueling a capital flight that, in the last two weeks, equals the value of the disbursement. But if he does not, he will be responsible for pushing Argentina into a serious crisis a few days or weeks after the elections.

It seems that the IMF has no room for maneuver to "take the time" to try to condition the elected president, as the economic and social situation may be aggravated by aggravating the currency crisis. The most logical thing for the IMF is to release the disbursement.

In the future, an economic program based on monetary, monetary, fiscal, financial, productive and social coherence will be essential. Renegotiate the agreement with the IMF and implement a plan for growth and development under a social agreement. The key is how to generate currencies authentically and use them productively in our country.

The deteriorated productive structure will require a relatively high and stable exchange rate, as an economic rebound will generate a cyclical rally in imports that will reduce the small trade surplus, with a current account deficit compounded by the return of profits, services and revenues. interests of the population. debt

A program that is compatible with a credible new government can be eased by higher investment and export revenues. But it takes time and the global context of protectionism and trade war does not help.

Therefore, the unrestricted opening of trade and the total financial deregulation that led to the crisis are not consistent with the stability of the exchange rate in the coming years. An intelligent global integration, far from the ideological delusions of the free opening macrist and the regulation of speculative capitals, is necessary. This does not necessarily imply a return to regulation introduced in 2011, partially reversed in 2013-2015, but a minimum of certain prudential standards such as the regulation of short-term capital inflow and the relocation of mandatory entry of exports to the market. change

It will be necessary to promote productive value chains that minimize the use of currencies, including the energy matrix, and promote systemic competitiveness not only dependent on the exchange rate or the price of commodities.

An imperative need will be to voluntarily re-use the debt from the IMF and private creditors and gradually reduce the amount of debt through public credit operations.In addition to promoting savings instruments in national currency at attractive rates by developing a fixed rate peso capital market with periodic auctions and local legislation that reduce the vulnerability of the external sector.