Despite this acceleration in the depreciation of the official exchange rate, it is still at levels below inflation. The February CPI figure of around 4.7% and the expectations that it will be even higher in March, calls into question what pace the BCRAif you want to avoid the loss of competitiveness of the peso, as agreed with the IMF.
However, in this scenario, an external factor brings relief and helps you not to have to speed up the pace of crawling peg (managed depreciation) much more. So far in 2022, the Brazilian real appreciated around 12%. In March in particular, its value went from 5.20 to 4.8 compared to the dollar, that is, it had an appreciation of 7%. According to analysts consulted by Ámbito, this news allows the Central Bank to avoid further depreciation of the official exchange rate since, when the real becomes more expensive, the terms of trade improve.
Jorge Neiro, director of the consulting firm ACM, pointed out that the depreciation of the official exchange rate is managing to sustain the multilateral real exchange rate as a measure of price competitiveness. This indicator is the one that, according to the Extended Facilities program signed with the Fund, should remain stable at the level at the end of 2021.
“The appreciation of the real in recent days is helping a lot because the peso once morest the dollar is still appreciating, but in multilateral terms it remains a little above the levels of the beginning of March, so we are stable,” he said. Neiro.
For his part, the analyst Ruben Ullua He agreed that the level of competitiveness will be able to be maintained, but warned that this will happen during the first semester. In this period, the conditions would be met for the government to maintain the multilateral real exchange rate levels in competitive terms.
“With the acceleration of the depreciation of the official exchange rate, the rise in rates the government will be able to sustain the level of competitiveness. Even with the appreciation of the Brazilian real, pressure is taken off the government so that in this period it does not have the need to accelerate the level of depreciation much more and can better control it, at least for the remainder of the semester. During the next few months, conditions of stability are presented that allow us to be aligned. In the second semester it would be necessary to observe what happens with different variables, both local and global; I see the situation a bit more complicated there”.
According to the agreement with the IMF, “the crawling peg regime remains appropriate, although key elements will need to be strengthened and recalibrated.” In other words, the rate of depreciation must guarantee a competitive real exchange rate, which allows for trade surpluses to meet reserve accumulation goals, for a total of US$15 billion in the 2022-2024 period.
In this sense, the government committed to the international organization to keep the multilateral real exchange rate stable in December 2021 values, which was at 102.5 points. Currently, this stands at 103.4, so the BCRA is managing to sustain the agreed competitiveness.
Along these lines, Neyro observed that, in the long term, the Government will be able to meet the objective of keeping the multilateral exchange rate stable, but warned that it will depend on the evolution of different factors. “If the real continues to appreciate strongly, the government will need to devalue the official exchange rate less. If it doesn’t, it’s going to have to devalue a little faster in the coming months. Therefore, it depends on what happens with the other currencies to know the rate of devaluation, in addition to taking into account inflation both in Argentina and worldwide.
