The dollar has fallen and bonds have risen, but the gap remains high and reserves are falling

Sergio Massa is satisfied with his first month of management aboard the Ministry of Economy. Since the announcement of his appointment on July 27, dollar bonds have risen by as much as 22%, Merval shares have improved by 33%, and parallel exchange rates have fallen by as much as 14%. The feeling behind closed doors is that the panic has stopped and the blue dollar has deflated from its high of $ 350 to $ 290, which is still high.

The diagnosis, according to reports circulating in official offices, is that the economy is beginning to go down a path of “stabilization” thanks to the change of government and measures, which included the containment of the monetary issue, the rate shock and the cut by spending 128 billion dollars. That deviation, according to them, “excited” investors.

On the other hand, private sector economists are not that optimistic. They still see a stage fragileespecially on the foreign exchange front.

“The data shows an improvement, it marks the end of the crisis, and there has also been an improvement at the international level because you had a huge drop due to the FED twists and turns with rates, so you are better off than with Silvina Batakis and you are back to the levels of Martín Guzmán, but this does not mean that you are stabilized, the exchange rate gap is greater than before the departure of Martín Guzmán“warned Sebastián Menescaldi, Deputy Director of EcoGo.

The spread between the wholesale dollar and the financial dollar (CCL) jumped in late June, when the Central Bank further restricted imports to meet the reserve target with the IMF. The measure, added to the bond rush, triggered the dollar and inflation and ended up expelling Guzmán. Then, with Batakis, the gap reached 150% on 22 July and, with Massa, it fell to 108%, but without reaching the level before Guzmán’s resignation, of 101%..

The Reservations is another cause for concern. Due to lower payments for energy imports and a slight improvement in foreign exchange settlement in the sector, the Central Bank made 13 consecutive rounds of purchases in the foreign exchange market. But still accumulates a negative balance of 525 million dollars in August and almost 1.6 billion dollars of net reserves have been lost since the announcement of the Mass landing, according to Ecolatina.

“The first month of a more rational programmatic change ends, without a plan behind it, but with stronger fiscal and monetary signalswe are witnessing a relative calm on the financial front with the stabilization of the free dollar and a central bank that has managed to stop the drain on reserves, the gap has narrowed but continues at incompatible levels due to the low level of reserves “, said Santiago Manoukian , responsible for the research of Ecolatin.

With no tangible results from the plan to raise $ 7 billion through incentives to exporters and credits overseas, Massa seems to be focusing on spending right now. The incorporation of Sergio Rubinstein reinforced the idea that the fiscal adjustment would allow the peso market to “dry up” and cut dollar demand. The problem is that these recessive-cutting measures take time and the market is still skeptical.

Although the BCRA has accelerated the depreciation rate over the past few days to effective 90% per annum, devaluation expectations remain high. With over $ 7 trillion in dollar futures contracts entered into by the Central, positions in October exceeded an effective annual rate of 200%, equivalent to an increase of 9.6% per month for 12 months, well above the ‘inflation. a level that seems unlikely to analysts.

Despite the rejection it generates at the Frente de Todos, speculation about a jump in the exchange rate returned to center stage at the weekend after the escape of an alleged plan attributed to the Deputy Minister of Economy. There, a 50% jump in the exchange rate was expected, which was denied by his spokespersons and led Rubinstein to rule out a devaluation “at least this Thursday,” in an audio he would send to economists.

“Yes, OK devaluation expectations have fallen to the margin, remain high, there are still no changes in reserves and the forward flow of income and dollar payments, so a devaluation jump has a low probability. The measures have managed to contain expectations, but the economy remains very fragile and in the midst of a crisis that cannot be resolved overnight “, said Claudio Caprarulo, director of Analytica.

Going forward, meanwhile, a busy four months are expected, characterized by a greater outflow of dollars from tourism abroad in the midst of the World Cup, less foreign exchange income from the countryside and the new demands that the organization could place when the economy the team arrives in Washington. That scenario, according to analysts, could force the government to tighten stocks and, if it doesn’t work, to adopt some exchange rate measures, such as splitting.