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The dollar after the exchange: is there room to relax the shares?

“I hope we can liberate the market once this negotiation is resolved.” These are the words of Miguel Pesce, Governor of the Central Bank, at the end of May, in full swing with the bondholders and with a strengthened stock that had just laid new barriers for importers. “We have to see how the market responds to the stimulus if the negotiations succeed,” Pesce said at the time.

People who buy 200 US $ solidarity that retail enables are more and more, with a barrage of ant claims that reveal the growing expectations of devaluation and that have already given rise to maneuvers to jump over these limits. Is there room today to loosen the restrictions?

Despite the currency shield that it mounted, the Central Bank sold more than 500 million US dollars in July and continues to demand in a small market to avoid validation of a higher rise in the dollar that goes from its microdevaluation scheme.

And it will be possible now lower the level of monetary issues with a treasury that can be conveniently financed in pesos? In line with expectations of devaluation, the idea of ​​an inflation acceleration is fed on the huge mass of pesos that during the pandemic turned to the Treasury ($ 1

.3 trillion) to cover the deficit and which will eventually lead to prices when activity creeps into the quarantine company .

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That the dollar loses with the exchange rate, the unwritten plan after the debt agreement

It is true that the exchange is not closed. There is a principle of agreement and as the market insists, it is now about maximize the level of adhesion and avoid noise until the end of August, the agreement will actually be realized.

But if everything flows smoothly, you can expects important changes in exchange and monetary dynamics What made it possible for Blue to hit $ 140 in an instant with a 100% gap with the official?

Clarion He advised several economists who, in addition to immediate price relief, are quite skeptical. The exchange is not enough. It was necessary but it falls short. Some see in the negotiations with the IMF an opportunity to review the bias of currency control. And even if they realize that it will be easier for the Treasury to place debt, the size of the deficit will not reduce the need for monetary issues at least in the immediate term.

Analysts look

Fernando Marull, from FMyA: “On the exchange side, the financial front may improve a bit with the exchange as some companies or provinces may place debt but the exchange rate is still delayed. This is what does not allow you to relax the stock. In addition to the news, the three risks are still present: the tax deficit, the monetary issue and the exchange of delays. “

“The arrangement can help the central bank reduce the monetary issue, yes, but financial needs are very highSo it’s more likely in 2021. The swap agreement and the IMF still need to be resolved. For the coming months, it will not reduce the demand for emissions of pesos. ”

Fausto Spotorno, head of the Center for Economic Studies at the consulting company OJF.  Photo: EFE

Fausto Spotorno, head of the Center for Economic Studies at the consulting company OJF. Photo: EFE

-Fausto Spotorno, of OJF: “As for the shares, an important issue will be the agreement with the IMF. I do not know how you go maintain an agreement with the IMF without attacking or resolving the currency sector. I think the fund will someday ask you to deal with it. “

“On the other hand, it is true that the Treasury will have better investment capacity, however the local market is very small and the tax deficit is very large. It should be remembered that all credit to the private sector in Argentina is about 14% of GDP. And this year it is still not very clear, but the primary deficit may be 7%. In one year, you eat half of the private credit. So I do not think the pressure on the monetary program will decrease. ”

-Gabriel Caamano, from consultant Ledesma: “The contractual principle decompresses the foreign exchange market and the price of assets in the short term because it spreads uncertainty and reduces fear of irrational decisions. But the problems and the imbalance, including those stemming from the pandemic and the ASPO, still persists. “

“As for the flexibility of stocks, with the current level of emissions and without further information on the tax path and the monetary regime, I see it as difficult. It remains to be seen what emerges from the negotiations with the IMF, both in terms of payment flows and possible macroeconomic definitions. In fact, BCRA began to put positive prices on the table, even for the banks, despite the shares. “

“In the short term, the change can help the Treasury invest more in pesos. But it provides net financing at the margin. The bulk will remain sent. Unless they enforce the regulation, for example through the banks’ reserve requirements (immobilized deposits in BCRA). “

Look too

Debt-dollar: a more important agreement for what it prevents than for what it generates

-Nery Persichini, from GMA Capital: “I think there is little room to make currency controls more flexible in the coming months, especially since the financial channel is likely to remain closed for several years after the exchange. The dynamics of generating dollars through the trade balance in a context of recovery will be central to the reserve as private sector tricks continue. “

“Without the threat of bankruptcy, the financial market will be able to function more calmly. It can even work together to finance temporary imbalances in the treasury and ease the burden on BCRA. But there are limits. The monetization of about 8 points of GDP means a risk of inflation to seduce investors in local currency but who see the question of the exchange rate, Treasury should offer interest rates that exceed expected inflation with some additive to compensate for other risks. “

-Martín Vauthier, from Eco Go: “Debt renegotiation is a necessary condition for the gradual reduction of stocks. It is not a sufficient condition. There are precise signs of fiscal convergence, that is, the deficit will gradually shrink when the effects of the pandemic, and also signals from the monetary point of view, an exit strategy in relation to the administration of liquidity that was generated in recent months and positive prices in real pesos are maintained for savings. “

“The change was necessary to continue to build up the debt market in pesos and give it greater volume, reduce the pressure on the central bank through greater refinancing of maturities. Even with the right signs, positive net financing can be achieved, ie all peso periods expire and there is a margin to finance part of the primary deficit. “

“But today, the stock is an artificial support for the demand for assets in pesos and it generates costs because the exchange rules affect companies’ operational decisions, they jeopardize productivity and, in addition, they have an impact on both the level of activity and inflation, in terms of price leakage. ”


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