Deteriorating reserves has accelerated the terms for obtaining dollars. The Government explores in these hours All options which make it possible to rebuild the coffers of the Central Bank, a requirement to avoid an even harsher exchange rate AND get to the elections without devaluing. From IMF advance disbursements to Brazil’s export credit, the alternatives at stake point to plug the financial hole.
as far as he could tell clarionthe authorities began contact with China expand the exchange for the payment of imports with yuan to the equivalent of 9,000 million dollars. “In principle, it is being worked on renewal and extension of US$5,000 to 9,000 million which can be used to pay for imports from Argentine SMEs that buy products from China,” official sources confirmed.
Since 2009, Argentina has maintained an exchange with China, which today it reaches 18,000 million dollars. The government of Alberto Fernández has announced several operations since November last year, in the midst of declining reserves and the first signs of drought. This included the activation in January for US$ 5,000 million intervene in the market e another equal amount for payment of imports with yuan, expandable to US$10,000 million.
As for this second section, Massa announced last Wednesday a new activation of the swap “importer”. The Chinese had insisted on using the yuan. And the race, which on the previous day caused the dollar to jump to levels close to 500 dollars, has accelerated the negotiations. According to official data, transactions in yuan for US$ 1,080 million had already been authorized in April and $263 million in May, of the nearly $800 million expected.
In parallel, the government seeks replicate the “Chinese model” with Brazil, with a mechanism that includes financing its exports to alleviate the projected loss of 20,000 million dollars due to the drought. After the emergency summit where Lula said the president was leaving “without money,” authorities reportedly slipped a sweetener: the possibility of reducing the deadline for paying for imports from that origin from 6 to 1 month.
“It is being negotiated, I cannot assure or deny that,” they said in an official cable. The goal is unblock a credit to Brazilian exporters to postpone the use of dollars. Due to import restrictions, more than 200 Brazilian companies have stopped exporting and the trade debt with them is growing. The matter will be resumed next week, but it won’t be easy because of the internal pressure against Lula.
“Bilateral trade is lacking for our country, and if imports accelerate it will be even more so. So Argentina has to pay for its imports, now or in a few months, if a way is found. But it has to pay them in dollars So the problem is Who insures the risk that Argentine importers will not be able to pay the dollars owed in the future?“, Soledad Pérez Duhalde, economist at Abeceb.
In January it was decided to expand the current exchange rate in local currency (pesos and reais), which depends on the Central Bank of Brazil (BCB). the organism, whose directors are Bolsonaristsnever explored. Lula proposed a feint on Tuesday through the new BRIC Development Bank, made up of Brazil, China and Russia, even if it involves more bureaucracy. “Nor will he sacrifice himself for giving them dollars for 90 days, I wouldn’t trust Brazil”reasoned an industrialist.
Everything indicates that the strongest card Massa has in his possession is the negotiation with the IMF. The program provides for disbursements of $10.8 billion this year and $2.4 billion next year. An advance of these funds would be a temporary relief, as it does not change expected payments. For this reason, Cristina Kirchner and the CGT are calling for a revision of the deadlines. The problem is that the agency would ask for a write-down in return.
Another option that would be on the table is the help of other countries, such as Mexico, Japan, Saudi Arabia and Russia, through bilateral loans of special drawing rights (DSP). After the pandemic, Martín Guzmán explored financing of this type up to 19,000 million dollars, but never thrived. The operation required the endorsement of the Fund, as SDRs are an asset used for transactions with member countries.
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.