7.7% inflation in March was followed by 8.4% in April: the blow to household pockets is powerful and presents few loopholes.
If at the end of the year people had pesos and thought they were saving, now their predictions go to advance consumption in basic necessities. The price of the food outweighs the concerns.
inflation of food eaten at home would reach 8.6% in May despite having lowered the rate of increase in the last week of the month, according to the survey by the consultancy Eco Go.
With the cost of living expected to rise 9% or more, the race to protect the pesos runs parallel to investors and businesses seeking hedges against a possible devaluation.
In a context where inflation beats wages, pensionsAt the fixed term interest rate (8% monthly) and the change in the official dollar (7%), the ride is very erratic and steep for peso holders.
At the same time, the fact that the official dollar ($239) rises 6-7% per month when the food index does so at 8.6% indicates the relative power of the official exchange rate in containing commodity prices food. basic basket. lagging behind the dollar lost effectiveness as an anchor to contain the cost of living and the exchange gap acts in the heights as a parameter of the devaluation expectation.
Financial operators navigate the ambivalence between those who are sure that the government will not order an increase in the exchange rate for the official dollar before the primary elections on August 13 and who doubts the difficulties of switching to PASO without hard hard dollars in Central Bank reserves and with a 100% spread between dollars.
Of course there are variations. Fernando Marengo of Black Toro argues that the government “He doesn’t want to devalue the suburban dollar” (the official one due to food prices and the election) but does not rule out variants of a few other farm dollars despite the grain companies saying there are no more grains to liquidate.
The scenarios projected up to the end of the year by economists coincide in two central themes: 1) that the Minister of the Economy get dollars fresh and 2) the conditionality with which the currencies come.
Sergio Massa needs freely available dollars to put on the table and show the market that not devaluing is possible, even without having to significantly open inventories to imports, which already have outstanding payments of over $10 billion.
Until it can come, the hedging process in the face of higher inflation or pronounced devaluation.
Companies stockpile and sell to cover operating costs and not much else.
He jump in stock price From mid-March to here, it shows that there are investors who are betting on the cards of companies with an export profile.
Since mid-March, Aluar shares are up 91%, Comercial del Plata up 42% and YPF up 70%. Also energy: Transportadora de Gas del Norte increased by 106%.
Is it a greater refuge to have shares in the Caja de Valores than in financial institutions, for example in the event of a crisis leading to a debt restructuring?
Some of these can weigh, but so does the negotiable bonds of dollar companies are the star of big investors.
THE private bonds linked to the official dollar (dollar-linked) are so popular that, in some cases, they offer negative rates of the order of 8%.
The New York-registered GD30 global bond has a 42% rate of return in dollars. It promises a major prize that few seem willing to exploit.
The hedging process, in addition to the expectation of a possible devaluation, is also based on the dollarization proposal that is agitating javier millei in case he wins the year-end election.
Of course, first we will have to wait for the result of the PASO and Milei’s electoral fortune, but the studies on dollarization and comparative analyzes with the Ecuadorian scheme are the order of the day.
A technical analysis on the feasibility of the dollarization of Anker Latin America (Luis Caputo) that is circulating these days raises possibilities and objections.
Without taking a position on whether dollarization “is the optimal monetary/exchange scheme for Argentina,” he makes two important points.
One is that with monetary data as of May 17 and a dollar of $490, “the BCRA should have dollar assets (bills or market value of assets) for US$ 40.800 million“.
The other issue to consider is the fiscal one: “the financial surplus consistent with this year should be of the order of 2.5% of GDP, which would imply a tax adjustment about 7% of GDP”.
The risky gamble of dollarization to bring down inflation would require many dollars and a large fiscal adjustment, as well as strong political support for the enterprise.
Meanwhile, the currency/inflation hedging process continues and foreign investors keep Argentina off the radar.
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.