The rise of the dollar It was framed in a scenario of high general confusion. The Central Bank last Tuesday lowered the monetary policy rate to 40% annually, and therefore the banks offered fixed terms at 30% annually.
This implied that the fixed terms offered 2.5% monthly, and the devaluation of the peso is 2.2% in the same period. The result was an annualized rate of 3.7% per year measured in wholesale dollars, a rate lower than the American rate. The consequence was that many people decided to leave a fixed term to go out and demand dollar bills. We do not know if this is a strategy to dollarize, or a monetary and exchange policy error.
Why the price of the dollar will not rise
On Thursday, the Government carried out a mega operation where the treasury placed capitalizable bills, and the banks got rid of repos operations with the Central Bank.
The entity led by Santiago Bausili reported that the new monetary policy rate was the yield on the bills, which generated a change in the monetary policy rate in less than 48 hours. Today the monetary policy rate would be around 4.0% monthly, which would imply that banks should improve the performance of savers, and perhaps in this way stop the departure of savers from the traditional fixed term.
Fixed-term savers should explore investing in mutual funds that today are earning much more than traditional investments.
The rise of the dollar has no chance of lasting over time. In a week, the treasury will invite the banks to a new exchange of debt from Central Bank repos for capitalizable treasury bills, which will cause the ratio of reserves versus monetary liabilities in pesos to be below the current value of alternative dollars.
With the drop in rates, savers abandon fixed terms and begin to buy dollar bills.
Regarding the structural view of the economic program, Four months of fiscal surplus have been achieved, and a new fiscal surplus is expected in May. This shows us that the anchor of the economic program is strictly respected. Monetary circulation grows at levels below the inflation rate, and below the amount of pesos necessary to rebuild the stock of dollars entering the reserves.
It is striking that alternative dollars rise at the same time that the Central Bank buys dollars in the market, and reserves grow. On the other hand, we have a trade balance surplus, and US$800 million dollars would soon arrive to increase the reserves.
What should be invested in?
The rise in Country Risk can be explained by the poor parliamentary management of the ruling party, which, to this day, has failed to approve the basic law and the tax reform. Since the tango is danced in pairs, the opposition also has responsibility at this point.
We believe that From the structural analysis there is no reason for an increase in alternative dollars. If the amount of currency in circulation grows in a limited way, the rise in alternative dollars will be limited. The analysis in other governments was very different, where we had a fiscal deficit financed by emission and that caused alternative dollars to rise to infinity and beyond.
If Congress approves the Base Law and on July 9, Argentina pays the amortization and income of public securities in dollars, we believe that We will see a sharp drop in country risk and a large rise in sovereign bonds in dollars.
In this context, bonds in pesos adjusted for inflation and FCIs appear to be a good investment alternative.
The rise of alternative dollars It will not impact the prices of the economy, since the market has values that are conditioned to the families’ pockets.. Today the price is set by the buyer and companies have to make an enormous effort to lower costs, increase production, reduce unit costs, and go to market with competitive prices.
Bonds in pesos adjusted for inflation emerged unscathed from this scenarioinflation will continue to fall, and these bonds are attractive because they show a profitability that is equivalent to inflation plus an additional bonus, especially in those bonds that mature from 2027 onwards.
The shares show their price based on the expected profitability, we do not expect great performance, but they are beginning to show selectivity. The companies’ balance sheets will show us the way. We will expand on this point soon.
The dollar is not behind, taxes are advanced. There is no chance that the dollar will continue to rise, as long as the Government remains firm in the conviction of maintaining the anchors of the economic plan and continuing to work under the motto “there’s no money”.
