To reach your destination it is necessary to take the correct route. This seems obvious, comes into collision when the President’s narrative reinstating dollarization as an agenda goes against the economic program that is being implemented and it does not exactly help to stabilize the demand for pesos. Although the truth is that, for the moment, the market does not realize the double message.
Starting from an extremely complicated inheritance with a broken BCRA balance (there are excess pesos that endogenously create pesos and many dollars are missing in reserves in a country without credit) and with a line of importers who “financed” Massa’s campaign waiting to access to the official dollar, The “controlled” shock program implemented two months ago is working better than expected. This in the midst of a convulsed political context where the “misstep” with the omnibus law in Congress tries to be capitalized by charging against the “traitors who are against change” in a country split in the middle while society’s tolerance for it is measured. a classic adjustment that is very recessive and inflationary.
The BCRA Balance improves while it continues to buy dollars, inflation moderates a little faster than expected, but remains absurdly high and inconsistent with a crawling peg that moves at 2% monthly (25.5% in December, 20, 6% in January and around 15% in the first data from February), the exchange gap remains controlled at 30/35% and Fiscal numbers show rapid consolidation based on a “Malthusian” mega-liquefaction of public spending. Above all, the pension spending that, by formula, has been adjusting with a delay to variables that run behind inflation (salary and collection).
But The improvement of the BCRA Balance is far from the “87.5% chance of being able to dollarize” raised by Milei in this week’s interview raid, where he simultaneously talks about a reform to a financial system where two out of every three pesos of deposits are “invested” in remunerated liabilities of the BCRA. The ratio seems to come from the quotient between the amount of dollars purchased by the BCRA since the government started and its calculation of the Monetary Base in dollars. (US$ 8,000 million)for which he does not clarify it but assumes a value of the dollar of $ 1.300 (56% higher than that of the official dollar).
From the dollar account side, the BCRA accumulates purchases for US$ 7,300 millionbut net reserves went from being negative in US$ 12,000 million to be negative US$ 6.5 billion, without considering the US$ 2,500 million that the IMF advanced to pay the amortizations until April, and without accounting for the bopreales debt that the BCRA is assuming to provide an outlet for importers. Read We went from underground twelve to underground seven, but we continued underground. And this without considering that today the BCRA buys dollars because it is paying in installments for new imports. Next week it will begin to pay 50% of monthly imports and in May it would pay 100%, so logically the pace of purchases that started at the beginning of the program in US$ 260 million dailyin recent weeks it has accumulated something more similar to 140 million daily. All in a context where the scheme for exporters who pay 80% to the official dollar and 20% to the financial dollar, generates that 20% of exports (around US$ 20,000 million in regime) are not purchased by the BCRA. This number is more than relevant if you take into account that it represents no less than two thirds of the trade balance.
In relation to the peso surplus, since the new administration took office, the monetary base has remained practically at the same nominal levels, $10.5 billion, falling 30% in real terms to 2.8% of GDP (it was 5% of GDP a year ago). While paid liabilities grew by almost $7 billion to achieve the $28 billion, reflecting a drop of 15% in real terms, to 7.5% in GDP points (they were 9% of GDP last August). Despite this fall, in official dollars the monetary base amounts to US$ 12,000 million and the liabilities paid to US$ 36,000 million.
Regarding the monetary program, the Central Bank continues to issue pesos for the purchase of dollars in the MULC ($5.3 billion), for the interests of a stock of remunerated liabilities ($4.8 billion) and for the cancellation of the exchange insurance issued by the previous management (LEDIV) ($2.6 billion)). This expansion was sterilized by the BOPREAL placements ($3.4 billion not counting this week’s series 2 placement that would add $1.2 billion) and Treasury placements over debt maturities that were used to cancel debt that the BCRA had purchased during the previous administration when the bond market imploded ($2.2 billion net of the execution of the puts). Puts are the options in favor of banks to sell Treasury bonds in their portfolio to the BCRA at the closing price of the previous day with a spread, against an eventual run. Today they reach $14 billion, 1.4 times the monetary base. It is precisely the existence of the “lender of last resort” in a context of stocks, which allows the peso debt to be quoted at 100% when the debt in dollars with a much looser maturity profile does so at parities around the 40%.
The program is inflationary and recessive. The expectation is that the drop in the level of activity will allow, via a collapse in imports, to contribute to the cleaning up of the BCRA’s balance sheet.
The drop in consumption would help compress the dollar prices of goods, underpinning the change in relative prices without bursting the population’s income. It is true that there is a “short savanna” here, the interest rate has to be low enough to not recreate the overhang of pesos, but it must be remembered that the objective is not to “milk the cow” in relation to pulverizing the pesos, but to stabilize the demand for pesos. A very negative interest rate for a long time contributes to the speed of circulation of pesos and that exacerbates the gap and slows the moderation of inflation.
The million-dollar question is how quickly inflation slows, amid a relative price correction and greater indexation of the economy, and to what extent daily micro devaluations and the interest rate can converge to an inflation rate in the single-digit percentage range, without having to resort to a new exchange rate jump that would accelerate the dynamics again. when simultaneously you must leave 80%-20%.
At some point we have to move from the exchange anchor to a monetary program that is not only based on a fiscal adjustment based on a megaliquation of spending that is not sustained and on a financial program that only recirculates the pesos within the stocks, also taking into account the increase in debt maturities in dollars starting next year.
Insist on the dollarization agenda with the current balance of the BCRA, where two out of every three pesos of deposits invested in remunerated liabilities and with a short maturity of the indexed peso debt issued with puts, it does not contribute to stabilizing the demand for pesos. If the destination is Usuahia, it is no use taking the route to La Quiaca.
