The ball has been put into play Jose Ignacio de Mendiguren saying “we are fighting minute by minute to avoid a sudden devaluation”.
Thus, the Minister of Industry defined in his own way a reality that the market knew by heart: the government doesn’t have enough dollars to face a 2023 that promises, in terms of economic activity, to be one of the most difficult of the last 20 years.
De Mendiguren’s advance was followed by the minister’s announcement Sergio Massa from the US: there will be a new round in the soybean dollar for a month and this will involve a sector devaluation the extent of which will be known at the start of the week’s operations. A dollar of 276/280, that is, 20% more than the previous $230 soybean dollar?
A series of will be added to the new round of soybean dollar higher dollars foster the liquidation of foreign exchange from other agricultural exports and a new import approval mechanism that takes up to 120 days for approvals. And that adds to a resolution by AFIP which increases the cost of most of the imports.
A survey of Argentine Industrial Union led 84% of companies to say so the terms of the import authorizations have been extended. It is clear that the official wholesale dollar of 209 dollars is very attractive when the dollar in the open market (calculated with liquidation) exceeds 405 dollars.
The economy tries a new round of partial write-downs In the attempt to immediately avoid a devaluation to “continue to carry it” with the dollars it manages to add to the reserves of the Central Bank and, at the same time, to collect through withholdings without being able to avoid the issue necessary to buy the dollars.
Massa’s decision to anticipate new devaluations drip Facing a Central Bank selling dollars for 18 consecutive rounds, in the official view, is based on the spillover effect of the drought.
One of the conclusions of a recent report by the consulting firm balance (Diego Bossio and Martín Rapetti) is categorical: “The climate catastrophe of the current campaign would have the greatest annual impact on exports, which would drop by 28%, and on the collection of export duties of agro-industrial complexes, which would drop by 38%”.
For Equilibra, the projected 18% drop in agricultural GDP would be the second worst of the last four droughts Argentina has suffered.
With this diagnosis under his arm and forecasts of a 7% increase in the cost of living index for March (inflation for Ecolatin was 7.4% and 107.5% in one year) there is a part of the finance that is watching another movie.
Argentine bonds are up 16% in two days and shares 15% in four-wheelers. Do you look at pre-election politics or do you trust that the United States will provide the government with some sort of bridge until the end of the mandate?
In the case of the bonds, prices were on a floor and the market is confident that the Central Bank will have to continue to act as buyer of last resort both because of the intention to set a floor and because of the need for pesos that the Treasury will provide to cover the deficit.
The latest analysis of Quantumargues Daniel Marx’s study on the movement of the peso: “Since the middle of last year, the Central Bank has indirectly assisted the Treasury by purchasing peso debt on the secondary market and thus generating a space for demand for new Treasury debt issues.”
And he concludes that this movement takes place in “a market in which the private sector puts on a show signs of saturation concerning the holding of public debt in pesos”.
The path to transit the economic year narrows and now it remains to wait how many dollars will enter the reserves of the Central Bank within the scheme of partial and sectoral devaluations which lead to generate expectations on when they will be next.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.