Massa faces the challenge of controlling the dollar with a weak central bank of reserves

Yesterday, the gross reserves of the Central Bank closed at 39,214 million dollars. the number is $ 312 million below the level where the year began. And the net reserves, which can be used by the monetary authority to intervene in the market and control the value of the dollar, do not reach 3,000 million dollars.

With this miserable level of reserves, and without having been able to put his contact person at the head of the Central Bank, Sergio Massa begins his management as the Superminister of the Economy, with the challenge of bridging the exchange gap between the official dollar and the alternative ones which has been around 150% for weeks.

The Central Bank opened the year with gross reserves of US $ 39.526 million, US $ 312 million more than the last official figure.

Gross reserves consist of the bank reserves of Argentine dollar deposits, plus the $ 20 trillion swap with China, holdings of gold, contributions from the IMF and other international organizations and freely available dollars.

In the seven months that have passed since 2022, gross reserves have not recomposed despite the agreement with the Monetary Fund – which allowed for funds to be paid for deadlines with the agency – and the record prices of the field, which has liquidated $ 19 billion so far this year, 20% more than in the same period last year.

But the political uncertainty driving dollarization, plus the surge in imports over the year, driven by more energy purchases, conspired against the Central Bank’s goal of replenishing reserves.

“Purchases from abroad are a historical record in terms of values: in the last 12 months they add up 75,869 million dollars“, contributes Santiago Manoukian, economist of Ecolatina.” The reactivation requires higher imported volumes and other elements drive the outflow of foreign currency, complicate the exchange rate and make it difficult to accumulate reserves “.

Among these reasons, Manoukian points to the jump in energy imports (6.6 billion dollars in the first half vs $ 2.3 billion in the same period of 2021); higher logistical costs (in June the price of transport continued to be 50% higher than in 2021 and 95% higher than in 2020) and the growing tourism deficit which went from 650 million dollars to 2.5 billion dollars .

“Added to this is the real appreciation of the exchange rate (18% over the past 12 months), a growing and persistently high exchange rate gap, negative real rates and some concerns about the supply of inputs in the winter.” Overall, “this favors an advance on imports (and overbilling) and fewer liquidations in the Single Exchange Market (MULC). Furthermore, the lack of commercial financing prevents the postponement of import payments, to which are added delays in sale of soybeans and lack of diesel “.

So far this year, Central has only amassed a purchase balance of $ 850 million, well below $ 7,400 for the same period of 2021, Manoukian points out.

The most worrying figure is that of net reserves. For the Ecolatin they are currently parked at $ 2,400 million.

In recent weeks, Miguel Angel Pesce, who continues to lead the plant despite the changes in government, has accelerated the rate of devaluation of the official exchange rate and brought it to 5.5% per month. But that didn’t help narrow the gap either, with the blue dollar and cash con liqui planted on top of the $ 300, nor to accumulate reserves.

Yesterday, a few hours before Massa’s confirmation as super-minister, the Central Bank raised interest rates in an attempt to make time deposits in pesos more attractive and thus lower the demand for the dollar. However, with rates of 61% for retail term deposits, ethe result is still negative before inflation which in the last twelve months has reached 64% per annum and is expected to close the year at around 90%.

reserves stretched

For Aldo Abram, executive director of the Fundación Libertad y Progreso, despite the IMF giving us back the dollars we used to pay them and giving us extra funds with SDRs, reserves do not grow as a result of the exchange rate.

“Unless they devalue heavily and thereby reduce the foreign exchange backlog, the Central will continue to lose reserves all the time, Unfortunately. And if he owns the shares, he will have to restrict access to the official dollar more and more, ”Abram notes.

The economist adds another factor. “We are seeing a decline in dollar deposits, which is also generating a decline in gross reserves. Since June 21, private sector deposits have fallen by $ 700 million. Net reserves are now $ 3.8 billion. , but the reality is that the government committed to the Fund to increase net reserves by $ 5.8 billion by the end of the year, and today that increase is less than $ 2,000 million, which makes that part of the deal unworkable, ”Abram says.

A report by the Fundación Libertad y Progreso based on CIARA-CEC statistics reveals that the liquidation of foreign currency from the oilseed and grain export sector so far during the presidency of Alberto Fernández is a historic record.

In the first 32 months of the current government, US $ 77,087 million of foreign currency was settled, 25% more than the amount settled in the same period of the administration of former President Mauricio Macri, 21% more than at same period of the first presidency of Cristina Fernández de Kirchner, 46% more than her second presidency and 161% more than what was established in the same period of the Néstor Kirchner government.

AQ