With currency controls and no devaluation, where will the dollars for the Central Bank’s reserves come from until the end of the year?

Where might the dollar supply come from in the second half of the year if the BCRA and its president, Santiago Bausili, already began to experience difficulties at the end of the second quarter (Gustavo Gavotti)

Following the rise of the dollar that seemed to find a ceiling during the last days of the week and the readjustment of the rest of the prices of local assets following digesting the iNegative impact of the announcement made 10 days ago From the perspective of the economic authorities, one question is imposed on the market: what will be the course of the Central Bank’s reserves, given that it is already more than clear that the restrictions may be gradually relaxed, but will remain in force for at least several more months.

The question may find another form based on the inflow of foreign currency: where will the supply of dollars come from in the second half of the year if the BCRA and its president, Santiago Bausilialready began to experience hardships towards the end of the second quarter, even though the field liquidated volumes within the parameters of recent years.

The first thing to do, in any case, is to analyze the dollar exit window. The week will start with the payment of the restructured bonds due on Tuesday 9th, amounting to around USD 2.55 billion, which will undoubtedly impact reserves. However, the effect will be partial.

The week will start with the payment of the restructured bonds due on Tuesday 9, for which some USD 2.55 billion must be paid.

Initially, a portion, although smaller, is in the hands of the Anses Sustainability Guarantee Fund (FGS), so these are dollars that remain in the system. They are only USD 300 million, according to the economist. Fernando MarullThree times as much, USD 900 million, is held by local creditors, which might also minimize the impact on the Central Bank’s reserves and might even help calm prices.

The remaining USD 1.3 billion, meanwhile, will be paid to non-resident creditors and it is this figure that will be the cause of the change. A week later, USD 645 million will have to be disbursed to pay a principal payment due with the IMF and in the remainder of the month, some USD 300 million will be paid to other multilateral organizations.

The bill for the month amounts to USD 3.6 billion, even though this amount is not reflected in the loss of reserves in its entirety. There will also be payments in August, although for an amount that does not reach USD 1.5 billion.

In order to calculate the outflow of dollars, it is key to highlight that energy import payments, given the low temperatures that have been recorded for several days and that will persist, are also putting pressure on the BCRA’s accounts, although, it is worth clarifying, it is likely that this flow will reverse in the following months if the cold subsides. The Central Bank continues to pay close attention to the National Meteorological Service.

Energy exports might help, starting in September, to reverse the harsh results expected for the BCRA in the coming months.

In fact, in the first five months of the year, the energy balance The US economy was in surplus by USD 2.4 billion and is expected to reach USD 4 billion by the end of the year, which will inevitably lead to a net inflow of foreign currency when the worst of the winter is over.

In the first five months of the year, the energy balance was in surplus by USD 2.4 billion and it is expected that by the end of the year it might even reach USD 4 billion.

Energy is also one of the sectors in which companies have investment projects that are still fresh in the ink, awaiting the regulation of the Large Investment Incentive Scheme (RIGI). It is known that this process can take up to two months, but it would certainly contribute, albeit in small amounts this year, to providing some dollars.

The expected impact of money laundering is also considered in the same process, that of regulation. Although the effect will eventually be mainly fiscal, some contribution in hard currency is also expected, with much more immediate terms than those of the RIGI.

However, the Government’s real bet to overcome the shortage of dollars towards the end of the year is, as always, on the countryside.

The calculation of how much was liquidated and how much remains to be paid is very complex. At first glance, this year the agricultural sector liquidated some USD 11,647 million in the first half of the year, a figure lower than that of the same period last year, when the harvest was strongly impacted by the drought.

Of course, Cohen’s economist adds to that figure, Martin Polowe must add the 20% that comes through the CCL, with which the liquidation totaled some USD 14,558 million.

Due to the price effect, this figure is higher than in 2018, 2019 and 2020 but much lower than in 2021 and 2022. The fact is that the economic team is convinced that once expectations of a devaluation and also of the lifting of the restrictions before the end of the year have been cleared, producers will accelerate sales that are now delayed in order to restart the production process, which would result in a higher inflow of dollars following August.

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Will Argentina Find Dollars in the Second Half of the Year?

In a country where the dollar is king, the question of where the next supply will come from is always on everyone’s mind. As the second half of the year unfolds, Argentina faces a critical challenge: finding enough dollars to sustain its economy and manage its ballooning debt. This is particularly pressing as the Central Bank of Argentina (BCRA), under the leadership of Santiago Bausili, has already started feeling the strain.

The Dollar Drain: Outflows and Obligations

The immediate concern is the significant outflow of dollars in the coming months. The first week of July will see a payment of USD 2.55 billion to restructured bonds, placing a hefty burden on reserves. While a portion of these dollars will remain within the system, the remaining USD 1.3 billion will be paid to non-resident creditors, representing a substantial drain.

Further pressure will come from the IMF payment of USD 645 million due in July and another USD 300 million to other multilateral organizations.

The winter’s icy grip also adds to the pressure, driving up energy import payments. The BCRA is closely watching the National Meteorological Service for any signs of relief.

Looking for a Dollar Lifeline

Despite these outflows, Argentina is not without hope. Several potential sources of dollar inflow might help balance the equation.

Energy Exports: A Potential Game-Changer

The country’s energy sector offers a glimmer of optimism. The first five months of the year saw a surplus of USD 2.4 billion in the energy balance, and this is projected to reach USD 4 billion by year-end. As winter fades, energy exports are expected to contribute significantly to dollar reserves.

Investing in the Future: RIGI and Money Laundering Regulations

The regulatory landscape also holds promise. The Large Investment Incentive Scheme (RIGI) promises to attract foreign investment, although its impact on dollar inflow this year will likely be limited. Money laundering regulations, while primarily aimed at fiscal goals, might have a more immediate effect on dollar reserves.

The Agriculture Sector: A Traditional Source of Dollars

As always, the agricultural sector is the government’s primary hope for replenishing dollar reserves.

The first half of the year saw USD 11.647 billion in agricultural liquidation, a figure lower than the same period in 2023 due to drought effects. With expectations of a devaluation and eventual lifting of restrictions, producers are expected to accelerate delayed sales, bolstering dollar inflow following August.

Key Takeaways:

• The second half of the year will see pressure on Argentina’s dollar reserves, primarily from debt payments and winter-related energy imports.
• Energy exports, RIGI, and money laundering regulations are potential sources of dollar inflow.
• The agricultural sector remains crucial, with delayed sales likely to accelerate as expectations shift regarding devaluation and restrictions.

The question remains: Will Argentina find enough dollars to navigate the challenges ahead? Only time will tell, but the search for dollar supply is a crucial factor in the nation’s economic future.