The Central Bank strengthens reserves and liquefies peso debt: how long will the streak last?

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One of the commitments that Minister Luis Caputo has made with the Monetary Fund for this year is to add 10,000 million dollars to the Central Bank’s reserves in 2024. With the start of the currency markets, reaching the goal seems possible, although analysts warn that nothing should be taken for granted.

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The Central accumulates a positive net balance on the foreign exchange market of 6,737 million dollars from the December 13 devaluation, of which $3,875 million is due to net purchases in 2024. Thus, after the devaluation, net reserves were strengthened by $5,769 million.


Thus, even if the net reserves remain negative, the red has halved: they have passed in two months it went from -11,000 million dollars to -5,600 million dollars, according to the estimate of the consultancy firm LCG.

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From GMA Capital they point out that “the cost of this sweet harvest is lto the imperturbable hardness of stocks in the flow of foreign trade“.

In parallel with the recomposition of the reserves, the other monetary objective of the current administration is to restore the accounting balance of the Central Bank, which until a few months ago was conditioned by the so-called “leliq ball”. According to GMA, through the repurchase of the securities held by the Central by the Treasury 5.6 billion dollars have already been absorbed. The issuance of the Bopreal, the bonus for importers, also played a fundamental role as it managed to aspire $4.3 billion so far.

In real terms, i.e. discounting inflation, the liability item remunerated in pesos, made up of leliqs and repurchase agreements, decreased by 22%. This liquefaction made these liabilities those of November they represented 9.2% of GDP, towards the end of January they were reduced to 7.4%.

“In this, the 100% benchmark interest rate (TNA) has made a non-negligible contribution to the liquefaction of these liabilities. Since there is nothing to eat, the authorities have assumed the risk that weight rejection will increase and the gap will heat up,” GMA note.

This risk is heightened by an official dollar that lags in real terms. The exchange rate policy of increasing only 2% per month means that the real exchange rate has already become 33% more expensive. “The price of the current dollar is at a level close to that inherited from the previous administration, which “Increasing pressure on the gap”notes GMA.

For Jorge Vasconcelos, of IERAL, the purchasing dynamics of the Central Bank which led it to pocket 6.6 billion dollars”does not in any way reflect a normalized foreign exchange market, essentially because payment for imports continues to be deferred at an estimated rate of $3 billion per month.” For exporters’ settlement of currencies to remain smooth in the coming months, “the currency gap should be minimal.”

In this line Vasconcelos underlines that “it is possible that this “The government has overestimated the stabilizing power of agrodollars for the current campaign.”

The contribution of agro-industry to exports would reach this year 34.7 billion dollars, according to the latest IERAL estimate. “Sector exports, measured in constant dollars, would be the lowest in six years, except for the 2023 cycle.” So, “the contribution of this campaign That would be $12.2 billion below 2022 figures, even if it would mark a recomposition close to 10 billion dollars compared to 2023.”

Source: Clarin

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