Different market consultants, such as Marina dal Poggetto and Martín Redrado, expressed doubts about the progress of the government’s exchange rate strategy and its attack on the fiscal deficit.
The director of the consulting firm Eco Go, in an interview with journalist Liliana Franco, admitted that “it is not clear where they want to go, if the objective is to eliminate paid liabilities and release the trap, I think they are going to set a death date to the carry, and if so, the fatal arrogance was not only on the side of the consultants, although most likely they are not thinking about removing the stocks.”
“One imagined that after the shock, the official dollar had to function as an anchor for a couple of months, and that interest rates did not have to overreact to inflation,” he reflected.
“At the end of the day, if the decision was not to restructure the pesos, the way out to start cleaning up the BCRA’s balance sheet implied a combination of status quo (stocks) and liquefaction. But at some point, in the middle of the year, the dollar and the rate had to converge to inflation“, he estimated.
Doubts about the end of the dollar stocks
With relative prices aligned and more reserves in the BCRA (today rates are still being raised, delaying the official dollar from above and sending 20% of exports to the CCL), a different anchor to the dollar could have begun to be set.
One imagined a monetary program that had behind it a fiscal program (that is not only based on the liquefaction of spending) and a financial program (that is not only based on the recirculation of pesos to the Treasury with PUT promoted via the reduction in the rate of interest).
Marina Dal Poggetto questioned the end of the dollar clampdown.
On the contrary, he concluded, delaying the exchange rate, lowering interest rates and providing insurance for banks that buy National Treasury bonds “consolidates dependence on the stocks and does not help stabilize the demand for pesos either.”
The reservation floor
As if he had guessed this diagnosis, the official deputy José Luis Espert praised on Radio Rivadavia the “caution of President Milei not to take false steps” and that until the reserves “have a floor of 5,000 million dollars, the stocks will not is going to end”, for which he set June as a tentative month.
If the IMF had agreed to expand the financing, that starting point indicated by Espert would have been assured, but not the fiscal hole that would mean stopping receiving the country tax, when the current recession affected the collection of props such as VAT and the check.
The former president of the Central Bank (BCRA), vice chancellor and head of the Securities Commission (CNV) assigned great importance to removing the stocks. “As long as it does not materialize, any discussion about the exchange rate will be about a vacuum,” he warned in radio statements.
Dal Poggetto, for his part, had agreed: “Let us agree that As long as the stocks continue to operate, the official dollar is not on the marketit depends on a decision by the BCRA as to where the crawling peg is located,” he recalled.
Javier Milei and his plan to eliminate the stocks, for some experts, would be delayed.
And he explained that “a $876, the dollar is located in real terms 45% below the initial overshoot, “5% below the start of the government of (Mauricio) Macri, and continues to fall behind very quickly with inflation that, even falling, multiplies by more than four times the crawling pace in April.”
He argued: “It is still 20% above the level prior to the December devaluation, and only 10% above the levels of early 1997 before the change in the global financial cycle and fundamentally the devaluation of Brazil seriously complicated the convertibility in a country with much lower systemic productivity than it had then.
He clarified that by systemic productivity he was referring to the tax scheme, exchange scheme, informality, closure of the economy, quality of infrastructure, and other conditions that affect the cost structure of a firm that operates in the country.
Regarding the Cash with Settlement (CCL), which Redrado recommended deregulating, he stressed that “it is not market either as long as the supply is driven by 20% of exports (at a rate of USD1,600/1,700 million per month, and “Demand is contained by all legacy cross-constraints (MULC/CCL) that continue to operate.”
And they even increased, he stated, with resolution 990 at the beginning of February, to stop the jump in the gap that was beginning to occur when importers pounced on that market to pay old debts.”
He interpreted that, leaving the 80-20% (something that appears in the latest review of the agreement with the IMF as a commitment before the end of June) would imply an additional delay in the export dollar, in a context where the rise in the costs in the midst of the recession are beginning to worry companies.
The quasi-fiscal deficit
He provided an explanation about the current situation: “If the financial program depends on the recirculation of pesos from the BCRA to the Treasury, paying a premium in each tender (the banks sell expensive bonds to the BCRA and then repurchase them cheaper with some stretch in terms, but with a PUT that strictly allows them to obtain liquidity against the BCRA with the risk of monetization).
He specified that “the remunerated liabilities today reach $33 billion. This scheme began to find limits in the last tender, when the pesos issued by the sale of bonds to the BCRA could not be taken by the Treasury in the tender.”
However, he highlighted that “the economic team is very careful in issuing zero-coupon debt” in order not to impact the interest burden and not complicate the fiscal numbers.”
He admitted, in this sense, that “for now, as long as he pays dollar maturities with flow (something that in 2025 does not seem to be able to be sustained), the “grotesque” restructuring of (Martín) Guzmán allows him to pay low coupons on the debt in dollars and The stocks allow you to take advantage of negative interest rates. The interest burden on the debt stock is only 3.8%.”
The economist, finally, emphasized that, beyond the technical analyses, “for now, there is a great tolerance of the population to the adjustment that is reflected in the surveys, which together with the decrease in inflation, the purchase of dollars of the BCRA and the fiscal numbers, are the four variables that the market monitors to continue supporting the path that local financial assets have been taking.”
Dal Poggetto set a death date for the Trade strategy, “which at the moment continues to be extremely juicy, both in what has to do with the carry in instruments in pesos and in the prices of the bonds in dollars that came from ridiculously low levels for a performing debt.”
But he recommended continuing to monitor the impact on rates, the increase in income tax (if it passes through Congress) and the increase in unemployment, beyond the political timing set by the surveys.
“I understand governability in two more dimensions. The first is that Congress approves the laws and that the Court does not annul them, for now the parliamentary management has been stumbling, we will see how the cut Bases Law and the fiscal package that obtained half a sanction progress. in Deputies and has to go to the Senate,” he indicated and added: “The second (dimension) is that the horizon of decisions is extended, meaning that the reforms are not reversed, as happened with those of the 90s.”
He stood out in that address the President’s method of constructing a story of heroes and villains behind, where he is the one who defines what role each person plays (who is caste and who is not).
