Reserves, the yuan and a hot summer

Reserves have a gold stock of 2.5 billion US dollars, the rise or fall of the raw material has an impact on the final stock, a few months ago, gold showed an upward trend.

Real reserves are determined by taking liquid and available reserves, and banks' dollar reserves are subtracted from the Central Bank, IMF currency and China's credit, the total would add a sum close to 13 000 million US dollars, a very low level for the current market pressures.

The government is seeking agreements with the opposition to clarify the economic and financial scenario; the contact between the presidential candidates and the economic referents allowed a scenario of greater tranquility, in the price of the dollar, shares and bonds. However, the effect of poverty persists and moods are not the best when investors lose money.

There remain about 65 days for the presidential elections, 118 days for the change of presidential command, but economic issues are developing, but calm prevails. Over the next 30 days, the IMF will determine whether the US $ 5.4 billion disbursement is under the US $ 58,000 million loan. If this money does not come, Houston has a problem.

The measures taken so far contribute to the general confusion. We froze the price of fuel and the government would not update public rates for the rest of the year. This only delays the adjustments of the year 2020, it will be necessary to see what measures the next administration will take in the middle of the summer. It should be remembered that in Argentina, many price, dollar and rate adjustments are made after December 28, April Fool's Day.

The national government has abolished the VAT on foodstuffs, a measure demanded by most Argentine politicians, but opposed by the same politicians who see their tax revenues decrease, which is almost a contradiction in itself.

Inflation generates a potential loss of resources in the future. If inflation rates do not fall below 55% per annum, companies, in their tax balance, will adjust their profit items and collection would drop considerably. At this point, there is an agreement between the government and the opposition, a reduction of resources would affect the national government at this stage, but much more for those who badume December 10, when it comes to collecting taxes quickly, there is an agreement between the candidates.

In this scenario, there is no doubt that we will live with high volatility in the exchange rate, inflation that will hardly fall below 50% per year by the end of the year, and serious fiscal problems. The problem is that in 2020, someone will have to defrost fuel prices and update rates, because the price of the dollar could be very different from the current value. The last to turn off the light.

conclusions

• All the measures of economic intervention at this stage could be effective in the coming months, but they should be reversed during the first months of 2020, which means that we are going to have a very hot summer, as Argentine politicians have always used it.
• In this context, we find it hard to see a sustained rise in the price of stocks and bonds. If the dollar has an artificial price, investors will buy at current prices until stocks run out.
• The devaluation of the yuan is an external factor that complicates the task of our country at this stage. On the one hand, it reduces our dollar reserves because we have a yuan swap that is devalued in dollars. On the other hand, the devaluation of the yuan has an impact on emerging currencies, which would force the Argentine dollar to continue to devalue to preserve bilateral trade with China.
• A substantial decline in the rate of inflation and interest does not seem possible, it will continue to delay the economic recovery, the loss of purchasing power of wages will intensify and business will become less profitable.
• We return to a scenario in which investors prefer to buy badets that allow them to protect the value of their savings. Properties give it more stability than bonds and stocks, it makes sense, the price of properties does not appear on the newspaper cover and the act is a property desired by most Argentines.
• The big problem is that the demand for pesos has disappeared, the speed of circulation of money is accelerating and inflation is far from giving way. What a problem for those who must govern from December. Whoever arrives will apply the basics of Machiavelli, all the bad news from the beginning, to improve in the end, which Mauricio Macri did exactly the opposite.