IPROFESSIONAL – A report by the economic consultancy Ecolatina warned that the foreign exchange market is on the “razor’s edge”, since “if the demand for foreign currency does not give way in the short term, a jump in the dollar could be as expensive as inevitable” .
The report titled “There are no reasons to devalue. Neither reserves “, he estimated that the Central Bank sacrificed more than US $ 1,600 million of reserves to contain the currency in September -of which US $ 600 million were in the second half of the month, after the tightening of stocks- and more than $ 900 million in October.
In this sense, he warned that freely available reserves pierced US $ 5.4 billion in the last week, and reached a minimum since the beginning of 2016. Consequently, a jump in the dollar would accelerate inflation and deepen all the problems that drag economics, according to the Ecolatina study.
Dollar and devaluation: what the harsh Ecolatina report says
The consulting firm indicated that “after the debt restructuring, the government sacrificed too many Reserves in a context of high liquidity, betting on an almost” magical “improvement in confidence, which unfortunately did not come”.
During October, Treasury tenders and an increase in the interest rate on repos through, some measures were adopted that sought to reduce the current excess supply of pesos. Meanwhile, these changes came late and in limited magnitudes: Dollar and devaluation: what the harsh Ecolatina report says Dollar and devaluation: what the harsh Ecolatina report says
Time is running out and the firepower of the Central Bank continues to run out. “There are no reasons to devalue; Neither does Reserves to contain a bullfight ”, Ecolatina said.
The consultant also warned that “a devaluation would aggravate the problems, but also extreme the stocks: a vicious circle, from which it seems impossible to get out of the top at this point,” he said.
Free Availability Reserves “are at their lowest since 2016 and if an additional source of dollars to” burn “does not appear in the market or the demand for foreign currency does not relax quickly -two things that seem unlikely-, a jump from exchange rate will be inevitable “, he concluded.
Blue dollar: quote
The blue dollar closed last Friday with a new low and was offered at $ 169 for the selling point in caves in downtown Buenos Aires, after five consecutive days of losses and at 26 pesos less than last Friday’s closing.
This occurred after the Minister of Economy, Martín Guzmán, ratified that there will be no devaluation of the official exchange rate.
In that context, investors looked closely at stock prices.
The dollar counted with liquidation was located at $ 147.70 (2.3% drop on the day).
For its part, the stock market dollar, or MEP, traded around $ 143.23 (-0.6%).
As noted above, the blue dollar was offered at $ 169 in caves in downtown Buenos Aires. What will the behavior of the blue dollar be? What is the behavior of the blue dollar?
In turn, in the wholesale segment, the US currency closed the wheel at $ 78.32, always under the watchful eye of the Central Bank (BCRA).
In the official retail market, the North American currency operated at an average of $ 83.90 in agencies and banks of the city of Buenos Aires, so the dollar saved, which is calculated with the surcharge of 30% of the PAÍS tax plus 35% of the income tax, it sold for around $ 138.43.
According to the usual survey carried out by the Central Bank among the main financial entities that operate in the City, these were the sale prices of the official retail dollar:
- Galicia: $ 84
- Nation: $ 83.50
- ICBC: $ 84
- Supervielle: $ 84
- Santander: $ 84
- Patagonia: $ 84.25
- Macro: $ 83.50
- Itaú: $ 84
The blue dollar, which stood at $ 169, does not have an official price, but its value leaves the average price in places of unofficial exchange.
For its part, Argentina’s country risk stands at 1,482 basis points.
This is how the different types of dollars jumped throughout the quarantine
The quarantine left many social and economic changes, in which the dollar became a star figure.
It is that since the confinement began in mid-March by the covid-19, the activity suffered a serious brake. To this was added the influence of political measures, unbridled inflation and various uncertainties for investors.
The result obtained was an evident rise in the prices of the different exchange rates that coexist and are used for the different sectors today in Argentina.
This is how different types of dollars have done since the quarantine began, at the end of March
1. Dollar for saving: + 62%
Even the official ticket, as it appears with its reference value in the Central Bank, can only be obtained by importers and settlements in the wholesale segment.
The blackboards show the restricted retail dollar, to which they must add the taxes implemented to make access more expensive. First it was the 30% of the PAÍS tax last December, and since last September, in the midst of the pandemic, the 35% advance of the Income tax was added.
That is, the price of the official retail dollar used to save or for credit and debit card transactions abroad, began the quarantine at around $ 85 and is now trading at almost $ 138. This figure represents a 62% increase in just over seven months.
Dollar blue: + 121%
The largest increase experienced among “the different dollars” used in the Argentine economy is led by the informal or blue, which at the beginning of the quarantine, was trading at $ 83, but with political noise, greater exchange restrictions and economic uncertainty , it was ascending until arriving days ago to $ 195. Then it dropped a few pesos to the current $ 184.
By way of graphing this escalation, in about seven months its value in the caves rose 121%. The price of the blue dollar made the biggest jump of all the exchange references during the quarantine. The price of the blue dollar hit the biggest jump of all the currency references during quarantine.
Dollars counted with settlement: + 82%
In addition to this behavior in the blue, the direct impact of the rise in prices was evidenced in the direct exchange references that are used to set the informal value, which are the operations that allow obtaining dollars in the Stock Market. Here, allusion is made to transactions that are also free, since mostly private buyers and sellers are involved.
In the so-called cash settlement (CCL) and the stock market dollar (or MEP), currencies are acquired through the purchase and sale of bonds and shares that are priced in pesos and dollars.
Cash with settlement arises from buying a bond or share against pesos in the local market, and selling it abroad in dollars.
“This operation has always existed, only that at times when there was no stocks, due to arbitration, the price was similar to that of the official wholesaler, although it was always less efficient because carrying it out implies paying commissions for the purchase / sale of used securities. ”Sums up Roberto Geretto, chief economist at CMF wholesale bank.
The value of the “conta con liqui” began the quarantine, in mid-March, at an implicit value of $ 91.6 and gradually rose to a maximum of $ 169 a few days ago. Today it is at $ 166.7. In summary, in these seven months and days I have risen to 82%.
According to Geretto, due to a question of nature in its determination, this stock exchange rate “will always be high”, since exports are settled in the MULC (official market), while dollarizations are channeled in cash with settlement. portfolio.
“In this way, while in the MULC there is a genuine supply of foreign currency, in the account there is liquidity, except in the case that there is more inflow of capital with pesification of investment portfolios”, concludes the expert.
Dollar MEP: + 72%
On the side of the stock market dollar or MEP, it is a dollar exchange rate similar to the cash settlement, the only difference is that the purchase and sale of the securities are made only in the local market. That is, both pesos and dollars are debited and credited to local bank accounts. Therefore, it is an “argendólar”.
“Usually, the MEP dollar trades below the cash with settlement, which is a dollar currency and that is sheltered in a foreign bank”, clarifies Geretto.
In mid-March the MEP was $ 91.4, today, on the other hand, it already reached $ 157. That is, it advanced in quarantine about 72 percent. Different exchange rates were increasing in price throughout the quarantine. Different exchange rates were increasing in price throughout the quarantine.
Dollar: causes of the quarantine jump
Ultimately, the conditions generated by the quarantine and the deepening of some already existing problems caused the exchange rate to rise in price at all levels.
“The preventive and compulsory social isolation (ASPO) constituted a launching pad for increasing the prices of the different exchange rates. The relative exchange rate calm that was noticed until the middle of the second half of March began to stretch week by week, until it became a convulsion that disturbs both the authorities and the economic agents ”, the economist Andrés Méndez from the AMF consultancy summarizes to iProfessional economy.
In his view, the exchange market was undergoing the “mutations” that characterized this period of isolation with “inevitable consequences.”
“On the one hand, the very dynamics of the pandemic forced an aggressive policy of financing public accounts through the Central Bank, which implied a creation of primary money equivalent to 80% of the existing stock when isolation was applied. A behavior that resulted in a greater amount of pesos for a stock of international reserves that tended to contract, ”Méndez details.
To this, he adds that a cocktail was added between a greater amount of pesos and a lower supply of foreign currency, which ended up raising free prices.
Another of the causes that was key in the increase in the prices of the different dollars was that the offering role was extinguished due to the lack of tourism from abroad and the fall in exports, something that was “more than supplanted by the buyers of dollar savings that were taking advantage of the ‘gap’ between the official exchange rate and the free exchange rate to obtain a profit ”, points out Méndez. The lack of reserves in the Central Bank led to an increase in the price of the The lack of reserves in the Central Bank caused the prices of the “different types” of dollars to rise.
The problem is that, for the experts consulted by iProfesional, the dripping of the reserves forced a new change of direction to the authorities, which were observed in the countless restrictions, fundamentally, to the applicants of official dollars.
The greater tightening of the exchange rate hold in mid-September led to more people turning to free places, both in the Stock Market and in the informal market.
For Natalia Motyl, economist at the Fundación Libertad Y Progreso, in the coming months she plans an expansion between the official market and the parallel markets.
“We see a cash settlement that is going to be below blue, although the difference is not going to be very big. The easing of the quarantine caused many to start turning to the dollar, a safer asset; after they had hoarded pesos since April for precautionary reasons, “she says.
And she concludes: “Let us remember that the increase in monetary issuance with peaks of 90% year-on-year in all this time, is also going to be felt now. All those excess pesos go to the parallel markets ”.