The brake on the accumulation of reserves took the market by surprise, which expected the opposite, that is, the purchase of foreign currency by the Central Bank accelerates at this time of year. However, the liquidation of foreign currency from the heavy harvest was not occurring at the expected pace, which suddenly cut a strong buying streak.
One fact that did not go unnoticed is that yesterday’s USD 9 million represented the second consecutive day of sales. Not something serious at all, but the first time it has happened since Javier Milei governs.
What has happened so far in June marks a change in the trend of strong currency purchases and accumulation of reserves. After having acquired more than USD 17 billion since December 11, the process now looks much more complicated. Of that total, just over half went to accumulate net reserves, which went from negative USD 10 billion to neutral ground.
But what is more worrying is that what happened in recent days is not something isolated, but rather projects important challenges for the future. Reserve accumulation is a crucial issue. To such an extent that the Minister of Economy, Luis Caputo, assured that a greater accumulation of the Central Bank’s stock of foreign currency is a necessary condition for exiting the exchange rate trap.
“The existence of the blend dollar and the commitments to private bondholders complicate the liberation of exchange restrictions” (Fundación Capital)
The level of gross reserves could exceed USD 30 billion if the IMF board approves the disbursement of USD 800 million corresponding to the review of March goals. But it is about a smaller amount, which does not change the diagnosis.
A report by the consulting firm Invecq published at the end of May already warned about the problems that the BCRA would face in increasing reserves: “The normalization of imports, after the quotation of payments in the first months, will imply that an additional USD 13,000 million will go away in the second semester, in relation to the first.”
But in addition, it indicated that the 2% official dollar adjustment strategy would also end up delaying the settlement of currencies in the exchange market. “Although a rebound is expected, agriculture could sell only what is necessary to cancel commitments and/or buy inputs – financing itself in pesos at negative real rates -, waiting for a better price,” they added.
In the near future, there are also several risks to the maintenance of reserves, not to mention the capacity for forward accumulation. A sensitive topic is the renewal of the swap with China, something not confirmed for now. This month USD 2,906 million mature and next month another USD 1,937 million. If the Government had to return them, the impact on reserves will be substantial.
Fundación Capital also reflected doubts about the improvement in the dollar cash flow that the Government achieved in the first months of the year: “The quotation of imports, the carry trade given a fixed exchange rate and the permanence of the stocks. But despite all this, net reserves are still in negative territory.”
The institution led by Martín Redrado and Carlos Pérez listed the difficulties that appear in the future to continue with the accumulation of reserves: “The existence of the blend dollar and the commitments to private bondholders complicate the release of exchange restrictions. Furthermore, with negative net reserves and USD 40,000 million of potential demand for commercial debt, the transfer of profits and eventual liabilities.”
An aspect that is generating increasing concern is the support of the blend dollar, which allows exporters to settle 20% through cash with settlement. Is about foreign exchange that the Central Bank stops accumulating, since Caputo’s objective is also to keep the price of financial dollars under control. “In terms of “assets”, income of only USD 2.6 billion is expected for the May – December period, after the USD 11.2 billion accumulated in the first quarter of the year,” they add in Fundación Capital.
