Central Bank net reserves continue to deteriorate despite settlement of 3 soybean dollar in recent rounds. According to Aurum Valores estimates, net reserves amounted to US$ -900 million at the end of April and have already dropped to US$ -1735 million.
This Wednesday, $3 soybeans contributed 169 million dollars, the biggest sale of a wheel since April 21st. There are eight business days until May 31, when this program ends, and so far they are in $2,834 millionfar from the US$5,000 million the government had expected.
The soybean dollar’s rebound helped the central bank add 9 rounds of purchases in a row. This Wednesday he pocketed $50 million. But this positive performance is not enough to rebuild reserves.
Market analysts point out that the problem is that what Central wins from one window, it loses from another. Salvador Vitelli points out that as of May 5 the monetary authority is about to do son US$112 million per day in “others”offset largely by its intervention in the foreign exchange market to control financial dollars.
For the consultancy firm Delphos, the intervention of the Central in the dollar and cash with liquid segment of the Euro MP is around 80 million dollars a day.
The impact of negative reserves
“Today, despite the fact that the BCRA managed to stop the bleeding of currencies into the Single Free Foreign Exchange Market (MULC) during the last few rounds, international reserves continue their downward trend”, report from the consulting firm Ecolatina.
Gross reserves exceed 33 billion dollars. To arrive at the level of net reserves, liabilities must be subtracted from gross reserves. On that list are trade with China ($18.7 billion), bank reserve requirements in dollars ($11.3 billion), SDRs and IMF deposits $3 billion at the Bank for International Settlements.
Ecolatina’s estimate is that of net reserves “They’re over $1.3 billion in negative territory.”
“Assume that net reserves are negative it does not imply that the BCRA no longer has the firepower to intervene in the markets (both currency and financial), since it still has the dollars available that match its liabilities to meet the excess demand for foreign currency,” says the consulting firm Ecolatina.
And they make it clear that this “it does not necessarily imply the use of bank reserves (as is often assumed), as money is fungible and any other liabilities mentioned could be used.”
In fact, the consultant estimates that “in recent weeks the swap agreed with China was mainly used“.
In this context, it is important to note that although private dollar deposits are declining, “Their coverage remains at high levels.”
Dollar deposits reach 15 billion dollars, in line with the average level from 2021.
The decline in dollar deposits through April 28 has accumulated 865 million dollarsunder the 900 million dollars left in July with the departure of former minister Martín Guzmán.
Ecolatina specifies that the current situation It doesn’t even compare to the outflow of deposits that occurred after the 2019 PASO election, when it was seen a loss of $9.5 billion, which meant nearly 16% of private dollar deposits were withdrawn in just 20 rounds.
They detail what banks have $3.9 billion in cash and the dollars embedded in the power plant add up to $11.4 billion. Thus, “the coverage ratio of deposits is approximately 100%”.
At the moment, “the rules imposed after the 2001 crisis make it possible to guarantee the soundness of the Argentine banking system in foreign currency”stands out.
However, they warn that “the macroeconomic scenario is showing extremely fragile in the face of growing political and economic uncertainty typical of electoral processes, an extremely complex exchange scenario and a worrying acceleration of nominality”.
Against this backdrop,”net reserves cannot remain in negative territory much longer. We will need to continue monitoring the dynamics of foreign currency deposits and their coverage ratio.”
AQ
Source: Clarin
