yesterday debuted bands of flotation for the American currency between $34 and $44 in conjunction with the bid of Leliqs to 7 days with sky-high rates that fell to the dollar at $39.
It is a new exchange rate policy aimed to reduce liquidity and lower the pressure on the dollar. For this the Central Bank tender Leliq daily to a 65% annual rate.
Today, the Central auctioned Leliq a 7 days deadline for $52.815 million, at an average rate of 69% with a MAX award level of 73%. This amount is added to $71.060 million awarded yesterday to 67% annual interest, when he tore off the new scheme of monetary policy.
In this way, I managed to attract capital and even were banks that sold dollars to take advantage of these high rates in the short term.
Being that it took only 48 hours of this new scheme remains to wait if we are facing a change in trend or if it corresponds to a punctual reaction that will be diluted in the week. However, there are very clear weaknesses in the new scheme: 1. what happens if the market will test the ceiling of $44?
The organization headed by Sandleris established that it will not intervene in the foreign exchange market whenever the dollar float between the bands, currently between $34 and $44.
If you drill the floor of $34 then the Central will go to buy dollars, accumulating reserves. This situation is difficult to achieve understanding that we have been more than 5 months of running Exchange that have resulted in a devaluation of more than 100%.
If you put to the test the ceiling of $44 then the Central established that it will be selling up to $ 150 million, it is not specified what happens if this amount is insufficient. The problem is not only that it does not reach, in relation to how it was intervening the entity in the last months, but that the market could force one devaluation more knowing the Central will sell “cheap” these $ 150 million. A dangerous game.
2. what implications has a minimum interest rate of 65% to upload?
The Leliqs are letters of liquidity to 7 days for private banks, in each tender is defined the interest rate which currently is based on 65% annual. It’s a letter in the short term to find that any of the entities that have liquidity surplus (more effective than need) can tip it in Leliqs, gaining a very high interest rate which makes it less attractive to going to $.
The cost is in terms of economic activity. Activity will suffer due to the high rates and lack of liquidity. Shrink the amount of pesos circulating not only takes away pressure the dollar but that it strongly affects domestic consumption being the industrial sector and the trade affected principals. At the same time, in a recessive and inflationary context see unable access to credit with rates very high.
The Government knows the costs in terms of activity and raises only in March there will be a rebound by harvest, private consultants say that it will be just in June, if they in fact stabilize the dollar and beat inflation. Everything seems to indicate that “you have to spend the summer”.
What is certain is a 2018 with great fall of economic activity and a 2019 will begin the same way.
