The multiple exchange rates, the drought and doubts about the 2023 crop, the huge number of debt maturities in pesos and the uncertainty of a pre-election scenario in Argentina, are factors that for the risk assessment agency Moody’s they will complicate the economic program agreed with the Fund and macro stability in the coming year.

Jaime Reusche, the new Vice President Senior Credit Officer for Argentina, of the credit agency, explained this Wednesday in a press conference that although the approval of the third program review between Argentina and the IMF It is good news” –because it shows “the good predisposition” between the Argentine leadership and the board of the organization-the rating agency still sees “many risks to compliance with this programme”.

Reusche replaced Gabriel Torres, historical analyst of the rating agency for Argentina, who has analyzed the evolution of the country’s debt over the past two decades, who left his post at the company weeks ago. For Reusche, inside the risks, the creation of “multiple exchange rates” is the most important, since “limits the possibility that the adjustment lasts within the framework of the program with the IMF”.

The economist listed among “the risks that set the tone for 2023, for the electoral process”to one “greater drought limitation the potential to attract financing flows and exports that serve to anchor the level of net reserves,” too a “weaker-than-expected fiscal adjustment, due to a lower willingness of the authorities to limit spending” and the “peak debt repayment in pesos” for the first half of 2023.

“We think the outlook for 2023 is quite complicated and undoubtedly more risks than those communicated by the IMF,” stressed Reusche, who warned that this combination will affect not only the continuity of the program with the organization but also macro stability, “despite the indications that inflation could start to slow down next year.

Even if the analyst acknowledged that there is no “single silver bullet” to stabilize this front, he said this the unification of the foreign exchange market could be a good alternative to start. “If we had to focus on one measure, perhaps it would be the unification of the many exchange rates towards an equilibrium exchange rate, which would make the economy competitive and help restore the level of net reserves.”

“If you look at the real exchange rate in Argentina, you notice that it has appreciated, it is out of line with the rest of Latin America”, warned the analyst, who estimated that the peso has appreciated by 30% in real terms over the past three years. “Exchange rate adjustment has been very slow, this indicates could give more marked appreciations or devaluations in the coming months to try to restore competitiveness,” he said.

“Just to avoid this adjustment, the government has implemented this very complex system of different exchange rates, which will be counterproductive for fiscal adjustment and external accounts adjustment,” he stressed to explain the “exchange problem ” from Argentina. “If there was a unification of the exchange rate in Argentina”it could “help anchor the macroeconomic adjustment”.

Although the rating agency does not foresee “disruptive events” for the coming months, Reusche warned that there are “a confluence of risks in the first half of next year”which largely depend on what happens with the soybean crop, which will result in a “limited supply of foreign exchange.”

A month ago, Moody’s had decided to keep the Argentina banknote stable in CA, the penultimate rung of its 21-vote scale and it was Gabriel Torres who broke the news. Now, Moody’s have clarified that “rating decisions are made by a committee, not by a single analyst, and it is this that gives continuity and global consistency”.

NS