The Argentine economy is a natural macroeconomic laboratory to which foreign universities should send their students to corroborate the functioning of certain phenomena that you will never see in other parts of the world.
The example of the official exchange rate goes. In Argentina it is worth $234 to the dollar. But that price is paid by those who access the single and free foreign exchange market, in practice companies, importers and subject to quotas. In an economy where restrictions and actions have shut out more and more players, financial and casual dollars are more important (between $434 and $468). According to a freehand calculation by LCG economist Guido Lorenzo, half of the economy runs on a $234 dollar and the other half on one that costs twice as much.
A priori, this puts the Central Bank in difficulty and this has been the case since October 2020, when Miguel Pesce and Martín Guzmán discussed what to do about it. To date, the criteria of the monetary authority have prevailed, don’t close the gap with a devaluation. Furthermore, since then, the Central Bank has not been able to accumulate reserves, even when there was no drought, because it has always shown a low price for the dollar as long as ‘do not pay the cost’ of a devaluation.
Right there is one of the crux of the negotiation with the Monetary Fund.
Sergio Massa asked the IMF a slack of the objectives of the Extended Facilities program and an advance on disbursements for the year of approximately US$ 10,640 million (see below).
For its part, the IMF is proposing an adjustment in the price of the exchange rate. He did so in his last personal report. It was with the term “accelerate creeping peg” or mini devaluations.
The country joined in May, accelerated to the average rate of devaluation. It went from 5.4% in January to 8.2% in the last week of April. This week it was 7.4%.
Argentina also, in line with the agency’s requests, raised interest rates and announced in May the removal of electricity subsidies for higher-income households, a historic request from Washington.
But the IMF would ask for more guarantees. Why would you invest more money in a program that didn’t work? The gap has not narrowed and inflation has increased.
Miguel Kiguel, an economist at Econviews, a former finance secretary who negotiated with the IMF, imagines that the organization “He will propose to Argentina that the dollars he grants her shouldn’t be given away for $230”. Consulting firm Analytica noted in a report that “the most likely, in our view, is that the agency will require a devaluation, a discreet increase in the exchange rate, as a way to correct relative prices.” According to Analytica, the official dollar should rise by about 100 dollars, to a value of 330. It is difficult for the ruling party to devalue -Cristina Kirchner directly opposes it-, but not doing it is no less difficult.
The city commented yesterday on a question that was asked in a report from the 1816 consulting firm. “If the Central Bank sells $470 million in the MULC in 6 rounds of May (through Thursday), what can be expected for the August-December period?, seasonally bad in terms of currency supply and this turn over with the presidential transition?Even if the IMF did frontload disbursements, it wouldn’t help much because the country has to pay him $11.3 billion.
Without reservations, eyes begin to focus on dollar deposits. The eyes of the market, of the IMF, and also of Massa, are increasingly focused on Fish.
Source: Clarin
