2024-01-04 14:27:00
The plan he made and implemented Luis Caputo As of December 10, it involves a point that generates alarm among economists: the liquefaction of pesos and the unattractiveness of interest rates might lead to a sudden awakening of the exchange gap that would break the temporary peace of the dollar.
Since his arrival in the government, the Minister of Economy applied a exchange rate jump of 118% and, in harmony with the Central Bank, reduced the monetary policy rate to 100% annually and announced the end of the tenders for liquidity letters (LELIQ) in order to clean up the Central Bank’s balance sheet through a migration of the debt towards the National Treasure.
For Milei, “two thirds of the improvement” that his policy will generate will be seen in the next 15 years
At the same time, cut the return on fixed terms to 110% in a context of expected interannual inflation greater than 200%, which results in an erosion of the national currency. In this way, the economic team implemented a trap for ordinary savers since, in real terms, One-month placements imply a loss of at least 15 percentage points if the monthly performance of 9.16% is contrasted once morest a price dynamic that advances at a rate of 25%-30%.
At the same time, the authorities modified the capital immobilization period for UVA fixed terms: from 90 to 180 days. This type of instrument, which adjusts for inflation plus 1%, had grown 70% in the last month of 2023 due to the shortage of profitable assets.
In addition, the ruling party’s roadmap contemplates a sliding path – also called crawling peg– 2% monthly for the official exchange rate. The logic behind the percentage is to provide a nominal anchor that survives the liberation and realignment of relative prices.
Weights, rates and gap: the dilemmas of the Caputo plan
However, economists consulted by PERFIL cast a pall of doubt on Caputo’s strategy and the devaluation objective set by the Central Bank in an inflationary situation that is estimated to be above double digits at least until March.
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In dialogue with this medium, the economic analyst Christian Butler He highlighted that with inflation of around 20%-30% in December and January and negative real rates, “It is almost impossible to maintain this stability in the exchange rate“.
“This is going to end up triggering the free dollar and the exchange gapthat it was an achievement of this government to have lowered it the way it lowered it. It has little life unless they start to raise the crawling peg: instead of being 2%, it should be higher. What happens is that if this alternative is chosen, the exchange rate anchor that they implemented to contain inflation is reduced,” he explained.
In fact, in recent days the spread between the official dollar and the financial ones began to widen once more. As he cash with settlement (CCL) like the MEP They broke the $1,000 barrier this week and stretched the difference with the wholesaler to 26,5% y 24,5% respectively. A few days ago, the gaps were close to 10% and they even pierced that floor.
Despite the rise in alternative prices, the BCRA continues with a buying streak in the Single and Free Exchange Market (MULC), where exporters take advantage of the high exchange rate to liquidate before inflation erodes post-devaluation competitiveness. Added to this is greater seasonality in the demand for pesos by companies and individuals to pay for bonuses, vacations and expenses related to the end of the year.
Thus, the entity led by Santiago Bausili accumulates purchases for USD 3,093 million in the MULC, which raised gross international reserves to USD 23,677 while net holdings – discounting the Central Bank’s liabilities – are around the negative territory of USD 9,000 million.
For the Analytics Director of Ecolatina, Federico Mollthe risk of the Caputo plan hovers around “the three speeds at which nominality runs: inflation still does not seem to drop below 20/25% monthly, rates are slightly below double digits and the exchange rate runs at a rate of 2%“.
From the perspective of the economist, to the extent that the interest rate beats the dollar, incentives are given to maintain the pesos within the financial system. However, he stated that this scenario is only possible if there are no doubts regarding the peso depreciation pattern set by the BCRA.
“There aren’t any for now, there probably won’t be any next month either, but the speed with which the real exchange rate lags is dangerous. There is still a cushion, but if inflation does not slow down very markedly, the sustainability of the process will begin to be questioned and at that moment the gap may open. It is not clear what the strategy of the economic team is“he judged.
First jump in the dollar since the devaluation
For his part, the associate director of EcoGo, Sebastian Menescaldithe ruling party opted for a combo of liquefaction of the pesos of the economy and a “dollarization with Central debt” in order to begin to improve the balance of the monetary authority in order to lift the exchange rate in the short term.
“This strategy was the least painful of all compared to the alternatives and the one that might achieve the goal the fastest. However, it is important to calibrate and correctly set up the flows of pesos and dollars in the economy to be able to achieve it. An incorrect assignment can lead to an exaggerated liquefaction or the impossibility of achieving the goal.“Menescaldi stressed.
The pesos in their labyrinth: the risks of the official strategy
A report by the consulting firm Ecolatina stated that pesos imprisoned by the exchange corset “they are lost in a labyrinth in which they do not find instruments that allow them to cover themselves once morest the strong inflationary acceleration expected for the coming months”.
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When analyzing the possible contingencies of the program outlined by the Minister of Economy, the author of the writing, Santiago Manoukian, stated that “the risk of an issue associated with the rescue of public securities persists in case the banks decide to exercise the put options (puts) offered by the BCRA”.
Secondly, the economic consultant did not rule out that negative interest rates in a context of strong inflation induce “a new drop in the demand for money, where financial USD might regain some attractiveness for the market“.
And he concludes: “If the inflationary acceleration is greater than expected, we do not rule out that in the coming months the market will perceive a real delay in the CCL-MEP and start considering them as an investment opportunity, which would coincide with the seasonal reversal in money demand since February and the increased demand in the MULC.”
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