Dollar: why the exchange deadline has an expiration date

The Central Bank (BCRA) this week authorized the lowest wholesale or trading dollar slippage in nearly six months.

It was by committing on the same day an adjustment of just 6 cents (the highest for a common wheel in the period), that caused it to close at $ 93.85, 29 cents above the $ 93.56 of the period. previous Friday and this represents an update of just 0.31% during this time frame. “The lowest since the last week of October without counting the week of this year which coincided with Holy Week,” explained Gustavo Quintana of PR Cambios.

He thus confirmed his support for the strategy of the Minister of the Economy, Martín Guzmán, of using the exchange rate as an “anchor” against inflation. (which does not yet yield results), although the figure of the person in charge has been devalued by the attacks received from the ruling coalition itself.

The increasingly tiring rhythm of crawling ankle does not surprise the market, who has already settled in to take advantage of it and has launched in recent days to calculate the sustainability of the BCRA’s strategy.

Not in vain reports and calculations seem to show that the official bet is not “sustainable”, a word that Minister Guzmán generally uses, without however really teaching the administration to which he is a part. That is, it must be reviewed by the regulator or the imposition of circumstances, as soon as possible. Even before the elections.

Part of that bet began to show in the second half of April, when alternative dollars woke up and demand for hedging was reactivated after months of calm.

The one who best explained these limits was the consultant Analytica, led by the economist Ricardo Delgado, in a report eloquently titled “The Currency Strategy in Discount Times”.

He recalls that “if the assets of the BCRA are valued at the official exchange rate, the liabilities do so at the rate of remunerated liabilities”.

In this regard, he observes that while The annualized rate of depreciation of the peso was 27% in April (it has fallen to 20% in the last 30 days), the rate it pays for its liabilities ranges from 31 to 34.5% per annum, in the pensions, and reached 38% in the case of Leliq, they represent 60% of this debt. “If the market finds that this logic is not sustainable, it will run towards speculative positions,” he warns.

Even this conclusion can be rushed depending on what the government decides regarding the debt owed to different organizations which expires in the short to medium term. “Like all scarce goods, he should decide how best to allocate dollars, but the truth is that if in the next few months he does not come to an agreement with the IMF, the government will permanently demand foreign currency for it. honor its commitments, ”he explains.

He refers to the $ 2.4 billion deadline with the Paris Club, which an official mission will seek to postpone this weekend.

But also to the payment schedule proposed by the last agreement with the IMF (for the repayment terms) including payments of 296 million, 396 million and 390 million US dollars in May, August and November for interest and the start of capital repayments. 2018 and 2019 in increments of $ 1,868 million per quarter starting in September.

“It is obvious that this flow of payments threatens the possible continuity of the exchange rate appreciation strategy”, he points out, both in the event that they materialize (because they would affect the assets of the BCRA more when the cost of its liabilities continues to increase and stands on average at 100,000 million dollars / months), and if she chooses to ignore them.

In order to APC Furiase, of EcoGo, the bet is limited because “there is no gasoline in the reserves and the inflationary inertia complicates the things”.

“The temptation to delay the real exchange rate with stocks may increase when the BCRA receives the SDR, especially if the soybeans accompany it. But with the dollar slipping 1.5% per month and with inflation remaining at 3% per month, November 2023 would be reached with a change at the same level as before the Macri burst, ”he observed during of a simulation to find the level that would trigger a new crisis.

For Analytica the need to turn around to avoid a recurrence of the seizure will appear much sooner. “Either the government returns to a rate of depreciation more in line with the nominality of the economy, or further tightens controls on imports, although with a negative effect on activity and prices”, they signal and predict for the coming months “a mixture of the two scenarios”.

In Consultatio, they believe that the “turning point” will happen between July and August, and not because of the typically electoral logic of economic policy, but because the series of accumulated imbalances will begin to take their toll. “We have debt events (the first coupon of the swap bonds expires and the grace period with the Paris Club expires), currency deterioration that will manifest itself with the worst seasonality of the currency supply and when it will hit the energy deficit again, ”he lists, among others.

The concrete thing is that it is ruled out that the market will then have many reasons to demand more coverage, which would dry up the hourglass (now wet) of official exchange rate policy.