translated from Spanish: Change control and re-profile to care for International Reserves

The measures announced in recent days appear in response to the inability of the Central Bank’s coffers to meet all its obligations: the payment of domestic and external debt, tackling the exit of dollar deposits and supplying ticket demand Green. After a nefarious August for national finances with a 55% drop in the value of the bonds, a jump by 38% of the value of the dollar and a loss of US$13,801 million in reserves in just one month, the situation became unsustainable.

The Government’s need to take letters in the matter is also explained by the uncertainty generated by the International Monetary Fund’s round trips about the disbursement of the much-needed $5.4 billion at a time when the calculation of the Reserves available from bCRA is around $15.4 billion. The question that emerges from the Central Bank’s squeaking firepower is what to use them on. Intervene in the exchange market to stop an even bigger escalation of the greenback? How do you make this intervention, or on the contrary, leave the price of the dollar free to give certainties about the payment of obligations? See. 
On the one hand, we have statements from government officials that argue the need to defend the value of the dollar around $60. In a scenario of total uncertainty like today, “weight defense” is costly, as evidenced by the more than $2 billion used by the Central Bank from THE STEPS to date just to try to control the dollar. But the scrapping of currencies at these levels cannot be sustained in time without generating a emptying in the coffers of the monetary entity, a scenario that would further undermine the confidence of Argentine debt creditors in the face of the eventual impossibility of making due to maturities, a situation that would be reflected in an increase in country risk. 

But this scenario is not only grim for the government, but is even more serious for the next administration: inheriting an unreserved central bank when the bulk of external debt maturities is concentrated in the period 2020 – 2023 means an insured default , and potential tensions with the IMF, our country’s top creditor. Even within this guidance is a debate about what strategy to take to try to contain the dollar. These doubts arise, on the one hand, about the strategy chosen by Sandleris and Cañonero, which consists of holding small auctions (about us$100 million) in the market, which only serve to fill the gap of genuine offer of the green back, at the tables. In this way, it creates a “burning” effect of reserves criticized by sectors that demand a more determined intervention by the Central Bank “to the Caputo” as happened during last year’s run, where the former president of the entity came to offer US$5 billion for at a certain price ($25), trying to stabilize the value of the dollar at those levels.
On the other hand, the alternative of caring for the coffers of the monetary entity is presented to try to show some certainty about the ability to repay the debt. This dynamic involves not intervening in the foreign exchange market, which can lead to an escalation in the value of the greenback, with an eventual inflationary spiralization. Moving forward in this regard can alleviate the Central Bank’s liability around a liquefaction of the value of LELIQs, but to grow the weight of external debt over national GDP, at a time where it is at levels of 110%. The actions taken by the new Minister Lacunza can be understood as an attempt to balance the scenarios presented: while stretching the payment of debt maturities with “re-reporting” to care for the Reserves and advancing change controls for generate solvency of dollars, intervenes in the market by offering dollars to try to contain new ups in the value of the green banknote.

Original source in Spanish

Related Posts

Add Comment