Dollar and low rates with country risk at historical maximum: what's going on?

The central bank has lowered, although very slowly, the interest rate for 6 days and the dollar, even rising above $ 44, has remained (even at the lowest point of today) since the end of the last week. Then, Why country risk is at its peak in the year and at higher levels than in the last round J & # 39; swap?

The dollar, the harvest and the IMF

The dollar is falling and the reason comes by offers. The long-awaited harvest has begun to be liquidated and a new disbursement of the loan with the Fund has been entered, which will mainly serve to keep the green away. As Dujovne said "We have to get used to volatility" and Unless the demand increases significantly, we expect this enhanced offer will bring us quieter months.

The fear that the harvest would be saved while waiting for a better price offer made sense, but after a year of drought, the sector had debts to cover and, with a credit market made impossible by high interest rates. It seems that the solution is to liquidate or liquidate. The logic indicates that they will liquidate the minimum and the necessary, but that will suffice and will secure funds at least for April.

Turn, the international reserves of BCRA Yesterday reached the record of 77 478 million US dollars, after receipts of US $ 10 835 million corresponding to the loan from the International Monetary Fund. As agreed with the IMF, the reserves will be used for budget support, but also for the daily sale of 60 to 120 million dollars and for the payment of the Treasury's due dates.

These sales have the side effect (though much desired) the strengthening of the supply of dollars on the foreign exchange market because it ensures a flow of currencies that will be sold from April 15 to November. Coincidence with the election period and the election campaign is a coincidence or not.

The rate will remain high

Although it comes from 6 days with very low losses in the two daily quotes of Leliq, the central bank authorities have established that the interest rate paid to the banking entities would not be less than 62.5%.

The intention of continues to bet that the savers stay in pesos strengthens and in this respect the plant must be able to increase the rate that private banks pay to fixed-term depositors.

The dispute is not minor because It will define which pesos are fixed today, but perhaps they will prefer the dollar tomorrow. It is fundamental to be able to calm the demand for dollars so that the funds do not become green, which is always happening during the election years.

If funds that are in fixed terms today go to the North American currency and give up the peso, the previous point would be energized. In this case, we will have to see what is stronger and where it leaves the dollar. The current regime does not allow the plant to intervene in the market exchange until the dollar today surpbades $ 51.20.

Country risk as a level of confidence

Country risk is an indicator for investors about the possibilities of a country to face the payment of its external debt. It seeks to quantify the risk that a state will not be able to fulfill its obligations.

Then, If the country risk increases, it is because it increases the possibility that the State will enter into a moratorium on payments, better known as fault. In this sense, this indicator shows investor confidence in a country's economy.

Currently, country risk is greater than 800 points. With an upward trend since last year, we are now at levels higher than those seen in foreign exchange markets and the maximum, without doubts, of this 2019.

Because? Because, although we have funds for 2019, the program after that does not seem solid and the markets know it.

Inflation and debt, the limits of the model

same if the dollar manages to maintain this fragile stability between a demand repressed by the high level of interest and an offer injected by the loan and the harvest, Inflation shows that pesos are worth less and devaluation is on our doorstep.

Since January, price increases have accelerated and increased by more than 10% in the first quarter. Estimates for April are not better. The government's commitment to reduce inflation with the economic recession has shown its inefficiency in January, but there does not seem to be any other plan and, in an election year, let the dollar to increase freely does not seem to be a safe option.

In turn, With the devaluation, not only is the dollar becoming more expensive, but, with most of our external debt denominated in this currency, the level of public debt is rising to worrying levels. It is here that speeches about the need to restructure the debt for 2020 come in.

These limits are clear for the international market, which expresses at the country's risk the limit of a system that only seems to want to maintain the stability of the dollar and succeed in pbading the time until the elections without setbacks.