The plan to temporarily halt the drain on reserves without devaluing the official dollar will leave some injured along the way. And everything seems to indicate that the The main cost will be paid by the Central Bank. With a wink from the IMF, the body chaired by Miguel Pesce must issue more pesos buying the dollar from soybeans at $300 and getting more expensive stocks and then selling them at $220.
According to EcoGo, the entity could issue in a maximum scenario up to $1.6 trillion to acquire $5,000 million. This implies more pesos in circulation, unless they are absorbed emitting more Leliq. The Central places these debt securities with the banks to capture the excess pesos pay them a nominal annual interest rate of 78% (113% effective).
The soybean dollar released on Monday will therefore exert more pressure to limit its impact on prices. “The new peso surplus issue is about to be launched more fuel to the fire and will help support inflation at a minimum of 6% per month, its effect is not neutral and will help support high inflation expectations,” said Sebastián Menescaldi, deputy director of EcoGo.
Three weeks ago, the central bank raised annual rates from 75 to 78% after learning that February inflation reached 6.6% per month. Now, consultants expect a minimum of 7% in March, which would reflect an acceleration for the fifth consecutive month. In the economics team, on the other hand, they exclude a rate hike to absorb the pesos generated by the export incentive.
Analysts, on the other hand, are evaluating this possibility to avoid further dollarization. “There could be another rate hike in April, but we see it more associated with the March inflation data and try to contain the parallel dollars. The BCRA will try to give some answers to information that is definitely negative,” said Alejandro Giacoia, economist at Econviews.
The IMF estimated in March that the “cost of subsidy” for the I and II soybean dollar it was 0.7% of GDP, this is the difference for buying dollars from exporters at a higher exchange rate versus selling to importers. For economists, the third version could cost between 0.7 and 1% of GDP. And the non-transferable note that the Treasury will issue to the BCRA to compensate it is seen as an asset of “low value”.
Ecolatina has identified four side effects: the relief will be short-term, it will have a “significant” monetary impact which will force the BCRA to increase remunerated liabilities (Leliq), the incentive for regional economies will generate “greater pressures” on inflation and will continue to make the official dollar less relevant.
The Fund also monitors the “sterilization cost” that the Central Bank will bear, as happened last September and December with the interest payment it had to face due to the additional liquidity in pesos injected into the system. Today, interest-bearing liabilities have already exceeded $12 trillion and are on their way growing at rates above 140%.
“With the monetary base growing just above 40%, what remains evident is that the demand for money is very low, so what the BCRA issues on the one hand must end up sterilising. For this March debt more than $800,000 million was paid in interest and so far this year, it’s already $2.1 trillion,” Giacoia said.
The balance sheet of the central bank would also suffer by accumulating reserves with a more expensive dollar. “BCRA’s balance sheet, therefore, will be beaten on both the asset side (very expensive reserves and low asset quality non-transferable letters) and liability side (expansion of debt remunerated at a 78% TNA),” said a report of GMA capital.
Right now, the government’s priority is stop the loss of reserves. The Central Bank sold $99 million on Monday and has racked up $3.5 billion in sales so far this year. The new regime, however, will condition the liquidation of exports in the future, as agriculture will once again wait for an improvement to sell its stocks once the benefit ends.
The Fund knows that today the soy dollar is Sergio Massa’s main tool in trying to achieve fiscal and reserve targets. That was what happened in the last revisions. But it also closely monitors the “distortions” it entails, such as the decision to monopolize soybeans. This situation, added to the drought, has forced a revision of the reserve target, a modification which would have been insufficient.
Source: Clarin
