Five financial indicators point to warning signs in the short term


The financial vulnerability of Argentina is increasing as the international context deteriorates. The disenchantment of projections for the world economy, for example, led to the fact that it was in December Wall Street will be negative in 2018 and both A local exchange as a stock market has been accused of a coup in one year, who has already pulled the red numbers in full.

There are five indicators that need to be monitored daily, as they clearly show a deterioration in the prices of Argentinean assets and allow a quantification of the fall in the economy in 2018, which may be the worst year after the recession in 2009.

1) the risk of the state. Upstairs 700 basis points, this index, which measures the differential rate of emerging debt in relation to US Treasury bonds, reveals Argentina could not finance the public deficit without the assistance of the International Monetary Fund.

Today, the ten-year US Treasury yields at 2.89% per annum (289 basis points). Argentina should reduce the country's risk of up to 300 basis pointsin order to reduce the rates of its government issues to 6% per annum in dollars, which is a very high return compared to those paid by other economies but is relatively affordable for future debt repayment.

Argentina has less than two years to achieve this goal since it is an agreement with the EU The IMF guarantees the payment of debt by 2020. Country risk in the EU the highest level in four years marked 800 units on December 17, 2014- expresses a degree of distrust investors on the possibility of returning to voluntary credit markets.

2) Merval in dollars. Head in action ByMA (Argentine bags and markets) lost half of its value in 2018 when measured in dollars. Even in pesos, in the year, almost no profit (+ 3.7%), whose inflation will exceed 45 percent.

The Merval's record began in 1989 with 29,974 points, approximately 1,607 points in dollars when the register was divided by the rate at the end of 2017. It is now around 815 points, after landing on 7 September with 710 points.

With inflation that is higher than Argentina, Merval can only show the pesos by repeating the average price of the economy, but it will not tangible recovery to earnings can be settled in hard currency and with a consistent volume of business that gives rise to an increase.

3) high levels. The currency exchange 2018 that caused it the collapse of the accumulated debt in the balance sheet of the central bank, within a few months, he catapulted the departure of two company presidents. The the devaluation of Argentine pesos "liquefied" this debt, written by Lebac, was replaced as an instrument for absorption of liquidity by Leliq from October, which happened from 110% of international reserves at the end of April to 42% end of November.

However, it was recorded interest rates that included escalation dollar. In pesos they reached 73.5% annually at the beginning of October and are now withdrawn to 59%, but remain extremely high and deepen the contraction of the economy. At this stage, The stock of BCRA debt will continue to increase and again the company's obligations can be a threat for financial stability, as happened in the second quarter of this year.

High rates are short-term effective, but they have continuity for several months to act in opposition to the search: Expectations of inflation and an increase in devaluation. It is therefore important that the reference measures fall short-term to a level that is closer to the expected inflation.

4) The price of the dollar. The highest inflation in 27 years which records the Argentinean economy this is related to the exchange rate: If the prices of goods and services rise, so does the price of the dollar, well in the economy. Since a lot of trading products have the value of the dollar as an essential element of their price, the rise of the dollar also affects the fact that these goods are more expensive on the domestic market.

In 2018, the price of the dollar was rising more than 100 percent, after a lagging behind in 2016 and 2017. Cumulative inflation since the government's takeover Mauricio Macri this was close to 162%, while the dollar was up by 181%, from $ 13.93, to the average retail dollar on December 17, 2015 – when the stock market was released – at $ 39.19 today

That means that this year, the dollar has risen with inflation and surpassed it by almost 20 percentage points, in a behavior that should not be surprised by the uncertainty about the development of the economy. But that would be another The government's failure to restore replaced swaps in order to speed up the reactivation in an election year, as sudden leaps of the kind of change that occur with these episodes are destroying expectations.

5) Reservations. The central bank's assets are back up all weights issued by the central bank. The dollars provided by the IMF are going as fast as they enter because they have the sole function of paying public debt and avoiding a by default.

It is therefore necessary that Argentina returns creating dollars with actual activity, z trade surplus of goods and services, so that foreign exchange reserves grow in a sustainable way and correspond to a the role of the stabilizing factor of inflation and the dollar and provide capability payment of debt in foreign currency.


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