Miguel Pesce, president of the Central Bank
The close of the financial week summed up the ton of uncertainty which has collapsed on the Argentine economy and, in a broader perspective, on society as a whole, witnessing another financial and political crisis which, for the worse, has no remote chance of resolving itself in the short term. The surge in alternative dollars led to the so-called “liquidation count” it will cross the 300 pesos barrier for the first time. The Central Bank ended up selling $ 100 million and racked up $ 730 million in sales in the week so far in July alone.
This activation of the CCL, mainly operated by companies and large investors, fully reflects what is happening in the financial market: excess pesos that are not channeled into debt issued by the Treasury (bonds) or Central Bank (leliq) and then they find their natural channel in the dollar.
The financial crisis started with the collapse of the pesos bonds a month ago has these consequences. Given the doubts generated among investors by the performance of the debt in pesos, the decreasing possibility of natural refinancing at each maturity, coupled with the political crisis, led to a sharp collapse in pesos bonds a month ago. Later the Central Bank went to “bank” the Treasury by issuing pesos purchase the bonds offered for sale by the Common Investment Funds. This has led to the fact that in the last month the Central Bank has released 1.5 billion pesos. It is good that many have remained in the banks, but a mass of liquidity has been released which, predictably, it ended up putting pressure on exchange rates.
In the first week of July alone, the dollar in liquidation rose by 20% and the gap between the wholesale dollar – that paid by the importers – and the CCL opened at 137%.
The other dollars also made a significant leap. The “blue” closed at $ 273 and the MEP dollar at $ 286. The wholesaler sold by the BCRA was at $ 127.
The possibility that the government decides to make the dollar used to travel and buy abroad more expensive pressures on the blue and on the Euro MP dollar strengthenedsince the dollar card could disappear as such, hence the consumption in dollars it would be weighed at a much higher exchange rate.
the analyst Fernando Marul He pointed out that “at the end of the week the BCRA started issuing less to buy debt in pesos. The market has stabilized. Furthermore, the Central has renewed the Banks sonly 44% of Leliqto force the liquidity that went to the BCRA to return to the Treasury (in the race it was the opposite).
So far, since June 8, he has been released 1.5 billion dollars, but the bulk remained in the banks ”.
But this week in particular, the non-renewal of Leliqs caused a liquidity wave that ended up lowering interest rates in unregulated pesos and many companies took advantage of that decline to take pesos at very low rates and turned to the dollar with those pesos. Many in cash with Liqui and others in MEP dollars.
The problem now for the Central Bank and the Treasury is to reabsorb the pesos They will have to significantly increase the interest rate. The central bank has raised them once a month, as soon as inflation figures are known. In turn, the Treasury, not wanting to validate a sharp rise in interest rates – it will be necessary to see what Minister Silvina Batakis will decide on this – chooses to finance itself with the Central Bank.
The June CPI will be known next week, a figure that will be “old” from this week’s commentary stampede. With the inflation figure for June, which is expected to be around 5.5%, the BCRA will certainly decide to raise rates. This rise will not be enough if we do not take into account the fact that analysts forecast inflation for July that could reach and even exceed 8%.
In a stressful scenario, dollar bonds could not stay safe. In the week they ended up falling more than 10% on average, which ended up bringing the country risk to the brink of 2,700 points.
The bonds are already trading at a parity of 20%, a simple and clear default scenario.
Source: Clarin
