Keys to defending the pesos in the midst of uncertainty and the financial crisis

The return of Sergio Massa to the Executive, this time in the role of super-minister, presupposes the configuration of a new economic scenario. Markets anticipated Silvina Batakis’ exit from the Ministry of Economy at the beginning of last week, as the trend of bonds, equities and country risk changed. An example: after hitting $ 350, blue was trading around $ 300 this Friday. These are all key variables for investors and savers.

Another factor was the increase in interest rates set by the Central Bank this Thursday (from 52 to 60%), which has a direct impact on time deposits in pesos. For example, for deposits of up to $ 10 million, it represents an effective annual return of 81.3%. For lower amounts, the rate is lower (54%), but guarantees the investor an annual return of 69.6%. The menu for defending money is extensive and at the request of Clarione, financial experts have analyzed the main investment alternatives. The following is a summary of their conclusions.

1) dollars

Nery Persichini (GMA Capital): After the bullfight, the free dollar seems to have gotten expensive. Today’s price, adjusted for inflation and exchange rates between Argentina and its trading partners, is equivalent to nearly a $ 5 dollar from its 2002 peak (nearly $ 4) under Eduardo Duhalde’s administration. However, relying too much on history could be a risk, because crises are not linear.

Santiago Abdala (PPI): At these CCL levels, it appears to be at a relative equilibrium point with respect to market weights. The arrival of Massa, hand in hand with some well-known economists with an orthodox profile, brings a bit of calm to the financial markets.

Massimiliano Donzelli (IOL): We understand that there has been an overreaction in the exchange rate. Beyond the theoretical, it must be recognized that the dollar is very sensitive to changes in expectations, so any news could change them and strongly affect its price.

Diego Martinez Burzaco (Inviu): The decline after the breach may attract the more cautious saver. The problem is that the world is going through a period of high inflation, so direct dollarization protects against a devaluation of the peso, but not from the loss of purchasing power of the banknote.

Flavio Castro (UADE): The rate hike by the BCRA, in line with and following that of the Treasury in the last auction (70% TNA), may be insufficient. The question is whether controlling monetary policy will suffice. Without a fiscal anchor with a clear signal of reduced spending and the deficit causing monetary imbalance (which could be exacerbated by the Central Bank rate hike), it implies the risk of higher future issuance and a collapse in demand for pesos.

2) Fixed terms

Martinez Burzaco: UVAs are the cheapest option for prudent investors. The other instruments that regulate inflation (such as the CER) have the risk of public credit, so it is linked to the fate and evolution of the fiscal accounts.

Abdullah: Fixed terms are not attractive because rates are lower than inflation. In this universe, we encourage those with hedges to adjust to inflation. The UVA have the disadvantage that the investment is fixed for 90 days.

Castro: The best alternative are the instruments that regulate inflation, CER or UVA. Although the BCRA has raised the rate, it remains to be seen whether it will be able to materialize the positive real rate pattern.

3) Bonds in pesos or dollars

Donzelli: Among all the varieties of Argentine bonds and, given the inflationary context, we favor those that adjust their capital through CERs with a maturity of 2023. These bonds offer protection of the pesos from inflation and are not very volatile as their maturity is close.

Castro: For riskier investors, dollar sovereign bonds are traded at settlement prices, with parities around 23% and 29%. Bonds maturing in 2029 and 2030 offer yields of between 38% and 43% per annum in dollars, but the risk is very high.

Perch: Local currency debt was hit hard after the June sell-off. Only the intervention of the BCRA calmed the waters in the short stretch. Dollar bonds are still forgotten by the world. At par of 20 cents, they are worth less than the securities in default between 2002 and 2005.

Martinez Burzaco: Despite the rally in dollar sovereign bonds this week, they still look very cheap. Of course, that attractive price has a very high risk as a counterparty, which is linked to the ability and willingness to pay that debt.

4) Cedears (allows you to invest in global companies with pesos)

Martinez Burzaco: Let’s consider the evolution of stocks on Wall Street. The markets were very volatile and presented opportunities. But you need to know that this involves investing in stocks and this has its risks.

Abdullah: Cedears are attractive to investors who have a 3-5 year investment horizon. They have the advantage of adapting to the exchange rate while providing access to the American market, which is far from its peak. The unknown of US inflation remains.

Donzelli: We must separate the grain from the chaff and not talk about cedars as if everything were the same. They have in common only the protection of the exchange, but, beyond that, each has its own logic and its result.

Persichini: These certificates have two sources of profit in pesos: the price of the “Contado con Liqui” exchange rate and the change in the underlying asset in New York. There are options for all tastes. But the final decision must always be aligned with each investor’s risk profile and time horizon.

5) Mutual funds

abdullah: They have two advantages. Diversification (with a small amount I access a wide variety of assets) and liquidity (I can get hold of pesos quickly). Martínez Burzaco: They are affordable, especially for those just starting out. It is easy to access, instrument and delegate investment management to an expert.

Castro: For retail investors, they represent a legally organized savings piggy bank. They are the best option for those who are just starting out and can tailor their investments to suit their risk profile. The advantages are many, starting from the accessibility, through the home banking of a bank account or the mobile phone through a virtual wallet you can “subscribe” to FCI shares starting from $ 1,000.

Bricks, that old Argentine obsession

The construction industry, investment in bricks, is one of the ambitious resources for Argentines. Due to uncertainty, the tightening on exchange rates and the near-non-existence of mortgage credit had a full impact on the housing market, which resulted in a collapse in prices. Is it a good time to buy a property? Is renovating in this context a good deal? are some of the questions that Clarione moved the specialists.

“The value of the properties has decreased slightly and there is a lot of offers published”, Introduces Soledad Balayan, head of Maure Inmobiliaria and market analyst. In her opinion, the purchase of real estate, “especially for personal use as a home or for children, is convenient”. Not just because of the price, but because “we see that there are now options available that weren’t there before,” she said.

Construction is an absolutely dollarized market. Hence, it behaves based on the ease or difficulty of accessing foreign currency (freedom of exchange or shares). With the advent of UVA credits, the business grew as did the value of the properties. After the devaluation in April 2018 and the restocking of inventories, a landscape has become complicated that has worsened in recent years.

“The construction cost per square meter today is almost half of that of 2017: USD 939 against the current USD 510 “, says Daniel Bryn, of Inversiónre. The director of the consulting firm Reporte Inmobiliario, Germán Gómez Picasso, completes:” Unlike what happens in other parts of the world, real estate prices in Argentina have decreased a lot “, he says. For this reason the expert believes that”they would have already hit rock bottom and they should tend to slowly settle upwards.

According to Gómez Picasso, those with dollars see that the currency is depreciating (due to inflation in the United States) and in some cases pour part of their savings into real estate or construction. “This has boosted real estate sales, especially in Greater Buenos Aires“, He says. On the other hand, Gómez Picasso describes that” this fact has promoted works ranging from construction of houses to expansion and renovation “.

The successive devaluations of recent years have favored those who accumulate dollars. Each jump in the US currency “lowers” the costs of materials, whether they are to be built, expanded or remodeledr. “Always renewing in the long term is a great investment,” says Balayan.

Bryn points out that, due to low prices, buying used properties in a good location offers the opportunity to enter the temporary rental business. “The oversupply in the market has generated the values ​​of the departments drop to the lowest level in the last 10 years“, He says. On the other hand, he adds that” with the dollar very competitive and the reopening of borders, foreign tourism is growing month by month. “

Currently there is an abundant offer of well-located mini-apartments or to be restored “for a value of US $ 45,000 or US $ 50,000that if they are modernized and furnished they can be rented on a temporary basis, “says Bryn. The one-time rental business has become popular globally with the emergence of Airbnb-type applications.

Argentina today, based on the blue dollar, is positioned as a very cheap destination, especially for Uruguayans, Chileans, Brazilians, Paraguayans and Bolivians. The offer is so tempting that many take advantage of their stay to shop for clothes, take food tours, and tour different shows.

At the blue price, eating at a VIP restaurant or grill in Puerto Madero costs between US $ 12 and US $ 16, according to the industry. There are five-star hotels that put together 3-day (short stay) packages, which include the room, special amenities, and all meals for $ 60,000, which is US $ 200 blue. For Uruguayans, Buenos Aires is a gift. This is not an exaggeration. In June, according to data from the Ministry of Tourism, 127,000 people entered from the neighboring country. Of that total, 77,000 did so as hikers: that is, they returned during the day.