Central Bank sales do not stop: in August it lost almost 700 million dollars

This Friday they went to the Central Bank $ 95 million to meet market demands. With this he completed the first week of August with a negative balance of his intervention in the Mercado Libre y Unico de Cambios of 675 million dollars.

If you watch the full 2022 movie, the result is even worse: accumulates a net sales balance of US $ 100 million. Last year, in the same period and with fewer clearances from exporters, he had pocketed a purchase balance of $ 6.7 billion.

With the slight change in expectations that the market has experienced with the appointment of Sergio Massa as Minister of the Economy, the bleeding of the Central has not stopped: in the seven shifts that have passed since July 28 when his arrival in the cabinet was confirmed, the currency authority lost $ 925 million.

The first week of August closed with the blue dollar a $ 293, five pesos above the level of last Monday. The contact with liqui ended $ 285a drop of three pesos in the week and the MEP inside $ 280.

On the bond front, Friday’s result was positive, with increases ranging between 1 and 2%, although it ended the week down 3%. Country risk has risen 1.9% so far in August and has ended 2440 basis points.

The purchases of the Central are crucial for the institution to turn the page and start accumulating reserves instead of losing foreign currency. Without a back-up cushion, the government’s attempts to avoid a devaluation shock would come undone.

To reduce the bleeding, Massa points to a plan for greater dollar liquidation by exporters, which leads them to enter 5 billion dollars in the next two months in exchange for incentives.

The recent minister’s additional card is to obtain loans with three international banks and a sovereign investment fund under the REPO regime in which the Argentine state grants collateral in exchange for funds. Economic team hopes to get some $ 2 billion This way.

The other bet is that the cold will ease and this will allow Argentina to reduce its fuel imports. Indeed, the Palacio de Hacienda lowered its August energy purchase estimate from $ 1.98 billion to $ 1.25 billion,exploited as the temperature is improving as well as the hydroelectric production of Yaciretá.

Few net reserves

Pablo Repetto, director of the consulting firm Aurum, points out that today the net reserves of the Central Bank are in entry $ 1.2 billion. At this rate of daily sales – above US $ 100 million – they will end between August 20 and 24.

The level of reserves is essential for the Monetary Fund to consider the quarterly objectives of the agreement reached and to make the September disbursement necessary, at the same time, to pay off the debts of the country with the international organization.

“No change in dynamics, Risks of complications with the IMF technical review increase“Repetto said. Given this scenario, the alternatives that the economist sees are all complex:” an adjustment of the exchange rate to improve competitiveness in the whole economy, a fiscal rule of fixed nominal spending until 2023, increase the rates so that the cost of borrowing is well above the new expected rate of devaluation e pray that the external context does not become more restrictive. But even with this there is no guarantee of success“.

For the economist Martín Polo, of the Cohen group, that the Central Bank loses almost 700 million dollars in the first week “is not a good omen, but this rate cannot be extrapolated because the first weeks of the month are always complicated. Something has to change: if they don’t find a way around it, the consequence will be a more violent rise in the exchange rate“.

“At this rate of sale, Central won’t last long, but the Treasury still has a few dollars of net funding it could sell to Central,” said Gabriel Caamaño of the Ledesma consultancy. “Even with negative net reserves they always have things to rely on; they can use some of the reserve requirements of dollar deposits and there is still a good amount of SDR from the net financing of the IMF deal.”

“The deal with the exporters has not been well received. The BCRA has been losing $ 150 million a day for the whole week and there are only $ 2 billion in net reserves left and cash reserves are negative by nearly $ 5900 million.” , noted Fernando Marull, director of the consulting firm FMyA. “The BCRA is borrowing some of its assets as collateral, both with gold and bank dollar reserves. It is no coincidence that private depositors have withdrawn $ 1,000 million in the last month, up to levels of 1. , 5 billion dollars “.

“We continue to think that Plan Massa will bring some calm to the market. We expect more announcements on the foreign exchange front, because the dynamics are unsustainable. If we exclude the devaluation of the official dollar, the next step will be the formal split, but it can’t take any longer, ”Marull said.