Saturday , July 24 2021

Armor dollar: the government has already set its own plan for the elections

Some signs of this first bimester have helped alleviate the tensions of the government in general and, in particular, the economic groups. It is not just about "financial summer", the stability of the dollar, low country risk and the improvement of bonds. The real economy would also begin to show some encouraging signs. Monthly comparisons (for example, real values ​​collected) already show that the decline in activity would stop. I mean, the economy would reach its bottom.

But What comes, does not bother anyone. This prediction of the vigorous recovery of the economy by the end of the year prepared by the Ministry of Finance in the Letter of Intent with the IMF has already lagged behind. In this text, they talked about the revival in the form of "V", which would enable the economy to grow at an annual rate of 8% almost at the same time when it is necessary to go to the polls.

At the bottom, the top officials of the Treasury acknowledged that they were too optimistic assumptions. Now, they estimate that the economy could grow by the end of 2019 with a rate of between 3 and 4%. Very little, considering that the comparison is a strong recession at the end of 2018.

All this taking into account the fact that it would support several factors. Harvest will significantly increase agricultural GDP in the second quarter and also provide a good amount of dollars. Moreover, the international scenario has changed positively, and new interest rate increases in the United States are not expected, at least in 2019. This increases appetite for emerging assets and Argentina can take advantage of this larger financial flow.

Of course, electoral insecurity is too great to dream of a stronger recovery. Very few are willing to make a mid-term or long-term decision without a clear idea of ​​who will rule in Argentina since December 10th.

Most companies do not have plans to increase the number of employees, buy a new machine, or simply expand. It is perceptible that the "opportunity cost" of the ten months is very low. In other words, if decisions are taken when the political landscape is clarified, no opportunity is lost.

In the government, it is clear that investments in 2019 will be negligible as well as job creation. Real wages will increase as inflation slows down, but this slower movement will improve. Reduction of reference interest rates can be strengthened again. But the banks will also be extremely careful when it comes to loans a few months before the election.

In particular, on the average, government priority is to avoid another currency crisis. "It does not bother us to move the dollar, on the contrary, revive the cork again. we must avoid all costs of sudden fluctuations as last year, because this paralyzes the economy and returns interest rates to the clouds ", they recognize in Central.

No one is hiding at this height The name of the game in the economic team is the protection of the dollar. Daily monitoring is related to the behavior of the exchange rate, demand for Leliq and interest rates. And so it will be up to the elections. Nothing would be more damaging to Maurice Macrie's efforts for re-election than for a new exchange rate shaking. The dollar should not be delayed, but the movements must necessarily be slow. The dollar must keep the page from the addresses of portals or newspapers.

So far, everything has done wonders. The interest rate has decreased by 13 percentage points since the beginning of the year and is now at Leliq at 46.2% annually. The reduction was much faster than expected. In the latest survey of market expectations (REM), disclosed by the Central Bank, economic advisers expected that these rates would apply only to April.

The stability of the exchange and the purchase of foreign currency by the central bank (approximately USD 850 million per month), with the resulting pessimism, accelerated the process of lowering the rates. The value of the dollar was virtually unchanged and although it has increased in the last week, it continues below the floor area.

Head of Central, Guido Sandleris, does not intend to be neglected. His favorite concept, which is reflected every time a monetary policy statement is released, is "cautious". BCRA knows that demand for dollars will increase from one moment to another. Dolphinization of portfolios is a classic pre-election in Argentina and this time is no exception. Worse: in the binary scenario (the victory of Mauricio Macri or Cristina Kirchner), finding a solid currency coverage before the elections can be tremendous.

The defense of the dollar in the high-demand scenario or start-up is never easy, as former head of the Federal Reserve Federico Sturzenegger and his successor, Luis Caputo, succumbed last year.

The only option is to make your bills right now. And this is what the Central Administrative Board is dedicated to and an important part of the technical field of the institution. The forecasts will be clear about the potential demand for dollars that could wake up in the coming months and at the same time, how much the foreign currency offer will increase.

In previous calculations, the situation looks quite balanced. For example, the demand for dollars can come from those who have fixed fixed installments for $ 300,000 million since October, attracted by high interest rates. They also need to join those who have bought Lecap (accounts denominated in pesos) issued by the Treasury and which have maturities in the coming months. This year, the titles in pesos are equivalent to $ 7,000 million.

It is likely that the corresponding part of these payments in local currency at high interest rates ends with a dollar from five or six months to the election. Additionally, there is some demand for accumulation and tourism balance, although the fall in both cases was high in the estimate of 2018.

In order to avoid this demand, there are basically two "taps". On the one hand, the trade balance dollars, which have become a surplus, are on average $ 1,000 million per month. This means that about $ 50 million is net every day that has not existed before and is crucial to maintaining the peace of the dollar. This trend has been seasonally stressed since April, as the rough harvest begins to be liquidated.

The second source is treasury bills, which will have a large surplus for loans paid by the IMF. According to the recognized Infobae Secretary of Finance, Santiago Bausili, the available amount will range from $ 6,000 to $ 11,000 million. All will depend on how refinancing of maturity will take place in 2019. These dollars will be sold on the market to deal with liabilities in pesos.

Among the trade surplus and the availability of the Treasury, the government would count on the number over the next eight months USD 15,000 million for a predictable increase in dollar demand.

But it's all in Excel sheets for now. The fact of how many currencies will be required by savers and businesses will depend on how research will come and how the degree of uncertainty will increase. But it seems that there will be sharp peaks, especially from June, when they will know who will be the final candidate.

¿Can a fall in rates endanger the stability of the exchange rate? Nobody knows exactly. But from BCRA, they explain that even after the recent weeks of decline, the price of pezos remain at very high levels, attractive for savers. With a 30 percent expected inflation, the -24% yield per year in pesos is still high under any parameter. But the bear's path would be very limited further. This will be very difficult until the elections will be drilled at 40% without compromising the peace of the currency.

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