Bleeding of reserves: the five measures with which Massa tries to stop the outflow of dollars from the Central Bank

The Central Bank is gone less than US $ 2,000 million in net reserves. In the coming weeks, the Minister of Economy, Sergio Massa, will implement various measures to put an end to the bloodletting, which in less than ten days has already required more than US $ 1,000 million in central sales to meet the demand of importers.

The Central Bank sells daily close to $ 100 million in the Single Exchange Market (MULC) to meet the demand of importers, who withdraw a similar amount per day just to meet energy purchases.

The size of reserves is key to allaying market fears that the government will not be able to sustain the current exchange rate and will be forced to devalue dramatically.

In the government they admit that they do not have a magic wand to strengthen reserves and point to a series of measures to stop the bleeding.

More clearance of exports

Last week, when he took office as minister, Massa announced that he had agreed with the agriculture, mining and fisheries sectors a commitment to liquidate $ 5,000 million in 60 days. With this, they try to patch up the soybean dollar, the mechanism devised by former minister Silvina Batakis so that they can go out and sell the saved crop and which the government estimates at around $ 15,000 million.

The soybean dollar stipulated that 70% of what exporters settled would remain in a dollar-adjusted account, while the remaining 30% could be converted into MEP dollar. This mechanism guaranteed to agro-exporters an exchange rate 15% higher than what they receive today.

For the campaign, the measure was not convincing. What is sought now is to improve these conditions and give them a higher interest rate than the current one.

international loans

Massa is negotiating loans for a close amount 2,000 million dollars with three international banks and a sovereign fund, The names of the institutions are not yet known, but it has emerged that at least one of the banks is not North American.

What is being sought is to establish a REPO, a scheme in which banks lend new dollars in exchange for a series of collateral that Argentina would deliver.

To oil these negotiations, the minister will travel to the United States, France and Qatar in two weeks.

rate increase

In 48 hours, July inflation will be published, with a record that, according to official sources, will be a shock for the government. Private individuals anticipate that last month’s data will be between 7 and 8% and will therefore be the highest for a month in the past 20 years.

Together with the Consumer Price Index (CPI) the Central Bank is expected to have a new rate hike at the board meeting. Last month it raised the benchmark market rate from 52% to 60% in one fell swoop. However, it is still below inflation, which is already at 70% per annum and is expected to end the year above 90%.

With the rise in rates, it is sought that investments in pesos are more attractive and that this eliminates the pressure on the foreign exchange market, even between alternative dollars such as blue and cash with liqui. This would make it possible to reduce the exchange rate gap, which today is around 120%.

Brake to transitory advances

The Ministry of Economy has reinstated it yesr $ 10,000 million to the Central Bank. In this way, it tries to reduce the debt it maintains with the monetary authority.

Last week Massa had anticipated it they will no longer ask the Central Bank for money to finance the Treasury. “We will go forward with the resources we collect and with the funding we can obtain from the private sector,” he assured in a press conference on the day of his inauguration.

So far this year the Central has moved to the National Treasury $ 950 billion in the concept of Transitional Advances. Part of that debt has already been paid with $ 322,449 million corresponding to the special drawing rights (SDRs) granted by the IMF.

The agreement signed with the IMF establishes a ceiling for Temporary Advances equal to 1% of GDP for this year, a goal that is on track to be achieved. This allows the business team to report it to the marketand will no longer use the “small machine” of the Central to be financed in this way. With fewer pesos on the street, there will be less pressure on prices and the dollar.

Import monitoring

In recent days, AFIP has begun to notify companies that had ensured refuge of access to the dollars to be imported so that they can present the relevant documentation.

With this candidacy strategy tighter control over importers that they get to justice the dollars that the government denies them, the companies are tried to be more rigorous and they orient themselves on this path only if they have all their papers scrupulously in order.

In parallel, the economic team hopes so energy imports will decline this month. “The temperature is one degree higher than expected. This, in addition to the increased generation of hydroelectric power from Yaciretá, will allow us to reduce the number of ships to import and reduce energy purchases from an initial estimate of $ 1,980 million. to $ 1,250 million “.

AQ