Since Javier Milei assumed the Presidency of the Nation, with Santiago Bausili At the head of the monetary authority, the entity bought more than half of the dollars that the private sector liquidates in the exchange market.
In April, it accumulated a favorable balance with its intervention of USD 3,348 million, in the sixth month with a positive result, the best month for the Central intervention since September 2022, when the first version of the “soybean” dollar was applied, a preferential exchange rate to encourage the liquidation of exportable surpluses. And it is expected that in May it will exceed that figure, given the advance in agricultural exports.
Despite BCRA purchases, reserves grew only USD 429 million in April, due to debt payments
From Monday, December 11, 2023, after the assumption of Javier Milei, the monetary entity carried out net purchases of 15,046 million dollars. The Central only made sales in four operational wheels starting on December 11 – and the one on Friday, April 19 was the only one with a neutral balance.
But this phenomenon of aspiring foreign currency did not fully crystallize in the gross reserveswhich grow under the administration of La Libertad Avanza in USD 7,166 million (33.8%) from USD 21,208 million on December 7. Less than half of the currencies purchased by the BCRA were retained in the asset.
In April, international reserves ended at USD 27,575 million, with important payments of capital maturities to the IMF and charges of just over USD 2,000 million in the last operating round of the month. He expiration schedule of public debt is compromising and the main cause that slows down the growth of reservessince an upcoming interest payment of USD 850 million to the Fund is scheduled, while a tranche equivalent to USD 5,000 million will expire in June due to the “swap” of currencies with the People’s Bank of China, which the Government seeks to renegotiate.
And on the other hand, payments for new imports have slowly been regularized since the beginning of Javier Milei’s government.
The level of purchases that the monetary entity maintains in the market is “full,” although analysts consider that a greater influx of foreign currency is necessary in the next three months of maximum agricultural liquidation, given the commitments to be faced.
“As for the supply from exporters, agriculture has not yet started to massively liquidate the thick harvest,” observed analysts from Personal Portfolio Investments.
“In short, it is behaving against its seasonality. Although at first the harvest would have been delayed due to weather conditions – the rains prevented the grains from being lifted -, experts in the sector consider that the price of the commodities and the effective exchange rate would discourage massive sales by producers. When observing the figures from the Ministry of Agriculture, Livestock and Fisheries, it is evident that producers prefer to refinance their debts in dollars contracted in the 2022/2023 campaign -drought- rather than sell to pay them off,” they noted from PPI.
The gradual access of importers is being perceived as the quotas of 25% every thirty days authorized since December 26 (PPI) fall.
On the other hand, “the gradual access of importers is being perceived as the quotas of 25% every thirty days authorized since December 26 fall, as the ratio of paid imports rises from 17.2% on December 23, 8% in January and 42.3% in February. Thus, it would not be unreasonable to expect a ratio close to 80% in April, which would be the highest since June 2023 (85.3%),” they stated from Portfolio Personal.
“In the case of Argentina, by maintaining the pace of devaluation of the peso unchanged, in a context where Brazil and China accelerated, it loses competitiveness in exports of corn, soybeans and byproducts,” he detailed. Roman Danteprofessor and researcher at the Center for Agribusiness and Food of the Austral University.
“Last week, we saw several calls from different sectors to eliminate export duties. But with a government focused on sustaining the fiscal surplus, in a context of falling activity that would take revenue down, it seems unlikely that this will happen,” he added.
For Dante Romano, if in the last quarter of the year the situation improves and is consolidated in the first quarter of 2025, perhaps this could be analyzed. “Even so, it would be late for wheat and for advance sales of corn and soybeans,” he estimated.
The Minister of Economy Luis Caputo stated that the appreciation of the exchange rate “is here to stay” and that You don’t have to wait for “a shock” regarding the value of the dollar. In addition, he reiterated that he will not immediately advance in lifting the exchange rate, that core inflation “will surprise more than one” in the April indicator and that there will be no new disbursements from the Monetary Fund in the short term.
“For May our focus is precisely on the flows, especially coming from agriculture, in a framework in which the Government continues to give indications that it will not move the crawling peg current 2% monthly. The focus will be mainly on the coarse harvest and how much it will be settled, given that import payments are beginning to weigh more, even with the staggered access scheme in force for a few months,” he said. Juan Manuel FrancoChief Economist of the SBS Group.
For May our focus is precisely on the flows, especially coming from agriculture, in a framework in which the Government continues to give indications that it will not move the crawling peg current 2% monthly (Franc)
A report from the Research team Wise Capital described that “the real exchange rate has been appreciating at accelerated rates: it is already at values prior to the devaluation of Sergio Massa at $350 and not modify the pace of the crawling peg 2%, in June we would be reaching a real exchange rate like the minimum of 2016/2017. The President’s position of not making changes is clear, but there are various external variables that are beginning to generate pressure on the wholesale dollar.”
And they considered that “the IMF was clear. He doesn’t want the ‘blend’ dollar. He tolerates it because it was inherited, but he will not approve of the current 80%/20% going to 70%/30%. Therefore, the Government has no other alternative but to analyze options so that there are incentives for agriculture to liquidate.”
“With a depressed dollar, the countryside settles as little as possible hoping for a better exchange rate. And with lower liquidation and an increase in demand from a rebound in activity, the gap is likely to begin to widen. With this scenario, at the time of unification, the official will converge towards the financiers, with its consequent impact on inflation. For these reasons we hope that in the coming months the Government will begin to accelerate the pace of the crawling peg, and not a discrete jump in the exchange rate,” Wise Capital pointed out.
José María SeguraChief Economist of PwC Argentina, considered that “although it is true and understandable that – given the inherited financial imbalances – the current administration focused on controlling the exchange markets, restoring balance to the Central Bank’s balance sheet, and avoiding a spiraling inflation, it is no less true that, until a monetary and exchange rate policy program is defined, the foundations for a genuine and vigorous process of investment expansion will not be laid.
Sooner rather than later, a process of liberating the exchange rate should be undertaken, and making the monetary program explicit (Segura)
And Segura highlighted: “Sooner rather than later, a process of liberating the exchange rate should be undertaken, and making the monetary program explicit. The exchange rate regime associated with such a policy should also be made explicit: free floating? Fixed exchange rate? Currency competition with fixed or flexible exchange rates? dollarization? This will allow us to limit the degrees of uncertainty, remonetize the economy and boost activity.”
