Dollar: five keys to understanding why the exchange rate gap does not stop growing

Foto Aldo Abram
Aldo Abram

INFOBAE – Despite successive dropper measures to try to stabilize, first, and then narrow the exchange gap, the tension does not subside in the City of Buenos Aires. The different parallel prices of the dollar reached record numbers yesterday and sounded the alarms both in the market and in official offices. A number of factors combine to put pressure on currency prices, from political to regulatory and financial.

The free dollar jumped to a new nominal record of $ 158 per unit yesterday, leading to the exchange rate gap with the wholesale dollar above 100%. The rise of the currency in the informal market was hand in hand with similar advances among the alternative quotes that are traded on the Stock Market, such as the cash with settlement that rose almost $ 3 to remain at $ 153.72 and the MEP dollar that climbed almost $ 1 .80 to close at $ 140.82.

The Central Bank does not stop losing reserves

Despite having reduced the market to a minimum after blocking the dollar for savings, the Central Bank cannot make the wholesale exchange market operate without its reserves covering the lack of dollars. Yesterday, in a market reduced by uncertainty and the lack of private bidders, the entity led by Miguel Pesce had to sell between USD 15 and USD 20 million, according to estimates by Gustavo Quintana of PR Corredores de Cambio.https: // e.

The Central dumps dollars from its international holdings to regulate the advance of the wholesale price. Without their intervention, prices between private parties would be agreed higher, a devaluation that the Government seeks to avoid. But without dollar suppliers willing to exchange their currencies at the official exchange rate, the entity is forced to sacrifice bills from its coffers.

In August it had to sell USD 1,279 million, in September USD 1,618 million – the worst mark since October last year, when the first stocks put a ceiling of USD 10,000 on monthly purchases by people and that the following month fell to USD 200 – and in the first three days of October another USD 353 million.

The gap feeds back

The reference of a free dollar to USD 158, almost 105% above the wholesale price of $ 77.13 per unit, in itself discourages the voluntary offer of foreign exchange. Sales of dollars in the wholesale exchange market are made exclusively by private parties obliged by regulations to do so: exporters who have deadlines to settle, exchange the dollars they obtain for their sales abroad for pesos.

But even when the regulations require sales, both producers and exporting companies have room to delay their sales abroad and save their production, which has an international price in dollars and allows them to hedge against a possible devaluation.

Exporters receive $ 77 per dollar sold and, after export withholdings, are left with an effective exchange rate of just over $ 50 for each currency. If, after the operation is closed, they prefer to demand dollars to hedge themselves, they are forced to buy at no less than $ 140 in financial quotes. Https:// Src = embed

Conversely, the exchange rate gap makes importers, credit card users, and savers rush to buy foreign currency or make dollarized consumption before new restrictions or a currency rise makes it impossible or more expensive. The result is that demand is skyrocketing and supply is pushed aside.

“The gaps already reach 100%, since they act as thermometers of concerns about the dynamics of pesos – due to the financing of the fiscal deficit – and dollars in the face of the drain on reserves”, Gustavo Ber analyzed in a report for his clients .

Insufficient measures

With the announcement of temporary reductions to the withholding rate for agricultural and livestock exporters and other sectors, plus the launch of a dollar-linked bond for USD 1,766 million that sought to function as exchange insurance to encourage agriculture and other sectors to change their dollars For pesos without exchange risk, the Government sought to attract foreign currency through incentives. The news that new restrictions were not imposed but benefits was welcomed, but did not generate a change in expectations.

“The Government launched a new package of measures that seeks to appease the foreign exchange market through two channels. First, increase the supply of foreign exchange through export incentives. And, secondly, to promote savings in pesos through new instruments tied to the price of the dollar and a rise in the interest rate ”, economist Nery Persichini analyzed in a report by GMA Capital.

Today the Central Bank led by Miguel Pesce tests with a short-term rate hike to stop the financing that drives the dollar

“Although the resolutions adopt an approach oriented to incentives, and not to restrictions, we believe that they arrive too late after the deterioration of expectations and that they do not have the necessary power to seduce the relevant actors”, he considered.

Exporters of cereals and oilseeds estimated that the stimuli could generate an extra inflow of foreign exchange of between USD 1,000 and USD 2,000 million until December, when the reduction of withholdings ends. But even if this higher settlement is carried out – there is an increase in the number of export tax returns – the dollars can take 15 days to reach the market, far from the urgency that the Central Bank has.

Monetary issue

After a break in August, in September the Central Bank resumed monetary issuance to finance the Treasury deficit. They were $ 193,500 million between temporary advances –loans that increase the money supply– and profit transfers. Advances grew 98.8% year-on-year and profit transfers 22.5%. And in the first days of October the Central had to issue another $ 30,000 million in just three business days, given the constant financing needs of the treasury.

“This is because the Central Bank is issuing a lot but also people are stopping to demand the local currency. The production of pesos increases without increasing demand. Then the values ​​of the weights go down. Purchasing power is lost in this way and it is reflected in the marked parallel, “said the head of Libertad y Progreso, Aldo Abram.

The enormous injection of liquidity that the Central Bank had to make to cover extraordinary expenses of the pandemic – LIFE, ATP, subsidized rate loans – finds its way to the different exchange markets, to the extent that families and companies hedge against the exchange rate volatility.

Pesce tries to contain with Leliq issues and pass the amount of money in circulation and, yesterday, tried to attack the problem that generates such liquidity in short-term rates that allow private companies to finance themselves at 25% to demand currencies that rise more than 100% so far this year. The entity last night modified the repo rate upwards to influence the rates of instruments such as guarantees that leverage the rise in the dollar. However, once again the flavor is what dominates among the operators.

“The fiscal and monetary dynamics until the end of the year will not help (in September it worsened compared to August). If the market shares our Maradonian interpretation of exchange rate policy and the BCRA is not willing to pay the cost of selling bonds at these levels, it is difficult for us to think about how it could manage to lower the gap and accumulate reserves again ”, analyzed a report by Consultatio Asset Management.


Among the reasons behind the constant bets of the market for poor results for official measures is the lack of an economic line that operators and analysts consider unique and clear. From the long arm wrestling between the Minister of Economy Martín Guzmán and Pesce to define the future of the USD 200 quota, which fueled the demand for retail dollars, to extra-economic factors such as the comings and goings around Vicentín or even international politics , undermine confidence in political actions The Minister of Economy, Martín Guzmán The Minister of Economy, Martín Guzmán

Martín Vauthier, director of Eco Go, said that the pressure seen on the free dollar reflects the situation of uncertainty in the exchange market. “The underlying reasons were not addressed beyond some measures that were in the right direction with the incentive to exports. But they were insufficient ”, he affirmed.

And he added: “There were also no signs in the most relevant areas when explaining the exchange rate gap. It has to do with politics. Signs are lacking to make clear the direction the Government is going to go. There are internal tensions within the governing coalition. That paralyzes investment decisions and makes local assets less attractive. In risk scenarios the pressure on the dollar is reflected ”.