To reach your destination you need to take the correct route. This seems obvious, collides when the President’s narrative that reinstatesdollarization as an agenda goes against the economic agenda being implemented and that doesn’t exactly help stabilize demand for pesos. Although the truth is that, for the moment, the market does not realize the double message.
Starting from an extremely complicated legacy, with the broken BCRA balance (there are excess pesos creating pesos endogenously and many dollars are missing in the reserves of a country without credit) and with a line of importers who “financed” Massa’s campaign in waiting to access the official dollar, The “controlled” shock program implemented two months ago is working better than expected. All this in a turbulent political context, where the “misstep” with the omnibus law in Congress seeks to be capitalized by accusing “traitors opposed to change” in a country divided in half while society’s tolerance towards it is measured. a classic adjustment that is very recessive and inflationary.
The BCRA balance improves as it continues to buy dollars, inflation moderates a little faster than expected, but remains absurdly high and inconsistent with a creeping exchange rate moving at 2% monthly (25.5% in December, 20.6% in January and around 15% in the first February data), the exchange rate gap remains contained at 30/35% and Fiscal numbers show rapid consolidation based on a “Malthusian” mega-liquefaction of government spending. Especially pension spending which, by formula, is adjusting with delay to variables that follow inflation (salary and collection).
But The improvement in the BCRA balance is far from the “87.5% chance of being able to codicil” raised by Milei in this week’s interview, where he simultaneously talks about a reform of the financial system in which two out of three pesos of deposits are “invested” in remunerated liabilities of the BCRA. The ratio appears to be derived from the quotient between the amount of dollars purchased by the BCRA since the government began operations and the calculation of the dollar monetary base. ($8 billion)so it doesn’t clarify it but assumes a dollar value of $1,300 (56% higher than the official dollar).
On the dollar account side, the BCRA accumulates purchases for 7.3 billion dollarsbut net reserves have gone from being negative 12 billion dollars be negative 6.5 billion dollars, without considering the 2.5 billion dollars that the IMF has advanced the payment of the amortizations until April, and without taking into account the bopreales debt that the BCRA is taking on to provide an outlet for importers. Light We went from underground twelve to underground seven, but continued underground. And this without considering that today the BCRA buys dollars because it pays for new imports in installments. Next week he will start paying 50% of the monthly imports, and in May he will pay 100%, so it is logical that the pace of purchases that began at the beginning of the program in 260 million dollars a dayin recent weeks it has accumulated something more like 140 million per day. All in a context in which the scheme of exporters paying 80% to the official dollar and 20% to the financial dollar generates that 20% of exports (approximately 20,000 million dollars when fully operational) are not purchased by the BCRA. This figure is more than significant if we take into account that it represents no less than two thirds of the trade balance.
Regarding the peso surplus, since the new administration took office, the monetary base has remained practically at the same nominal levels, $10.5 billion, falling 30% in real terms to 2.8% of GDP (it was 5% of GDP a year ago). While paid liabilities grew by almost 7 billion dollars to reach the $28 billion, reflecting a 15% decline in real terms, to 7.5% of GDP points (they were 9% of GDP last August). Despite this decline, in official dollars the monetary base amounts to 12 billion dollars and liabilities paid 36,000 million dollars.
As for the monetary program, the Central Bank continues to issue pesos for the purchase of dollars in the MULC ($5.3 billion), for the interest of a stock of remunerated liabilities ($4.8 billion) and for the cancellation of the exchange insurance issued by the previous management (LEDIV) ($2.6 billion). This expansion has been sanitized by BOPREAL placements ($3.4 billion not to mention the placement of this week’s series 2 which would be added $1.2 billion), and Treasury placements on debt maturities that were used to cancel debt that the BCRA had purchased during the previous administration when the bond market imploded ($2.2 billion net of the execution of the puts). Puts are options for banks to sell Treasury securities in their portfolio to the BCRA at the closing price of the previous day with a spread, in the face of a possible run. Today they reach $14 billion, 1.4 times the monetary base. It is precisely the existence of the “lender of last resort” in an equity context, which allows peso debt to be priced at 100% when dollar debt with a much more flexible maturity profile does so at parity around 40%.
The program is inflationary and recessionary. The expectation is that the decline in the level of activity will allow, through a collapse in imports, to contribute to the recovery of the BCRA’s balance sheet.
The drop in consumption would help compress the dollar prices of goods, supporting the change in relative prices without exploding the population’s income. It is true that here there is a “short savannah”, the interest rate must be sufficiently low so as not to recreate the excess of pesos, but it must be remembered that the objective is not to “milk the cow” as opposed to pulverizing the peso, but to stabilize the demand for pesos. A very negative interest rate for a long time contributes to the speed of circulation of pesos and so on worsens the gap and slows down the moderation of inflation.
The million dollar question is how quickly inflation slows, in the context of a relative price correction and greater indexation of the economy, and to what extent daily microdevaluations and the interest rate can converge towards an inflation rate in the single-digit percentage range, without having to resort to a new jump in the exchange rate that would again accelerate the dynamics. at the same time you have to leave 80%-20%.
At a certain point we will have to move from pegging the exchange rate to a monetary program that is not based only on a fiscal adjustment based on a megaliquation of unsupported spending and on a financial program that is limited to putting the pesos back into circulation within the shares, also taking into account the increase in dollar debt maturities starting next year.
Insist on thedollarization agenda with the current balance of the BCRA, where two out of three pesos of deposits are invested in remunerated liabilities and the short maturity of peso-indexed debt issued in a put manner does not contribute to stabilizing the demand for pesos. If the destination is Usuahia, it is useless to take the road to La Quiaca.
Source: Clarin
