The Central Bank’s reserves returned to the forefront of market analysis, facing a two-month period with high debt maturities in dollars and a new uncertainty about when the Government finally decides to lift the exchange restrictions. They turn out negotiations with China key for the swap payment: this month US$ 2.9 billion mature and another US$ 1.9 billion will be added in July.
Without official definitions on what the arrangement with the People’s Bank of China will be, the expectation is that if it is not manages to postpone this expiration forward, The Government must pay, even in part, with dollars from its coffers, which will further compromise the level of its reserves.
“In the extreme, not reaching an agreement would imply disbursing US$4.9 billion between June and July for the swap. Added to this is the fact that we must pay US$2.6 billion in July of capital and interest from Globales and Bonares. The payment to the IMF for July would be covered with the disbursement that would arrive this month. Therefore, you would have to pay US$7.5 billion in these two months if an agreement was not reached for the Chinese swap,” they indicated in PPI.
This Monday, the Central began the sixth month of the year with purchases for US$ 59 million in the exchange market. On Friday, had sold US$ 52 million and raised alerts in the City about the ability of the monetary authority to rebuild its net reserves in a positive direction, even in a period where seasonally there are greater liquidations in the export sector and with lower import demand due to the drop in activity.
So far this year, the BCRA accumulates purchases for less than US$ 16.5 billion and in the last two months the pace of purchases decreased: it went from accumulating US$ 3,348 million in April to US$ 2,522 in general.
Martín Polo, from Cohen, explained: “This slowdown occurred despite the fact that agricultural settlements increased 40% compared to April, totaling US$2.9 billion (about US$3.6 billion if the 20% that is settled via CCL is included). ), in line with the average clearances for this time of year. The lower purchases are due to the. greater net demand for foreign currency by importers, due to the gradual normalization of payments for imports”
“By paying 25% of each month, a normal month of payments has already accumulated, which would have exceeded US$ 4.4 billion in the month, which would imply almost 90% of imports,” Polo added.
Argentine expenses outside the country could begin to be added to the import pressure. In this regard, the consulting firm Outlier noted: “It is also possible that there will be greater demand associated with consumption abroad with cards as a result of the recovery of income in dollars and the lower interest rate differential.”}
Getting net reserves back into positive territory is key to being able to begin thinking about a scenario of liberation from exchange rate obstacles. The consulting firm Aurum estimated that the stock would total negative US$2,811 million. “In historical perspective, it is located at levels similar to those of March 2016 and leaves the BCRA in an extremely vulnerable situation if it were to lift the stocks prematurely. We estimate that by the end of the year they would close at levels similar to those observed at the beginning of 2022. “, they said.
At Outlier they estimated that net reserves were They maintain a negative balance of US$ 3,000 million, with the methodology used by the Monetary Fund.” If government deposits in foreign currency are not subtracted, they would still be negative around US$ 2,000 million. And if, in turn, the maturities of BOPREAL series 2 are not subtracted from a year from now, they would still be negative by a few hundred,” they said.
“It is unlikely that net reserves will increase enough during the second half of 2024 to reach the minimum liquidity requirements to exit the stocks to which the Milei Administration has referred on other occasions (US 15 billion). which, the gaze focuses again on the ability to articulate net financing in foreign currency with the IMF and others, changes in the current scheme that accelerate accumulation and/or on its own pragmatism to design other exit schemes that require lower levels of liquidity “, they pointed out in Outier.
However, if the Government finally reached an agreement with China, a good part of the uncertainty these days for the market would be cleared up, which translates into a new and persistent rise in the financial dollar, which found in the $1,200 area a new “floor”.
