He Economy Minister announced in the week that the era of negative real interest rates had come to an end.
So, Luis Caputo decreed the beginning of a new era arguing that it was no longer necessary to promote negative rates to advance the liquefaction of liabilities of the Central Bank (BCRA).
Until last week, the dominant idea in the Economy was aimed at meeting the president’s objective Javier Milei to end the liabilities of the Central because The payment of interest in this way implied an important source of monetary emission.
The transfer of BCRA liabilities to Treasury debt (from Leliq to Lecaps) is being the core of the policy of trying to extend the payment of short-term debt, placing national government securities in the banks’ portfolios, always riskier than Central Bank bills.
Lecaps (Treasury Bills Capitalizable in Pesos) are short-term bonds for which the Treasury pays banks 4.25% monthly and that would be the rate, according to Caputo, that would no longer be negative in the face of inflation.
The Lecaps pay 4.25% compared to May inflation, which was 4.2%, but traditional fixed terms of savers, who offer 31% annually (2.6% monthly) were well below the increase in the cost of living.
For banks that raise funds at a zero rate in current accounts, Lecaps continue to pay off, but those who save in pesos, to their extent, are suffering the same fate in the liquefaction carried out by the government as retirees and employees. However, his luck could now begin to change.
Caputo’s announcement about the end of negative real rates can also be read as an admission that it went too far by lowering the monetary policy reference rate to 40% annually (3.33% monthly).
The reduction in this rate had a direct correlation in an increase in the exchange gap (distance between the wholesale dollar and the financial ones) that rose to 40% after having fallen to 25%, the lowest level in times of the exchange rate.
The government now aims for an interest rate scheme of 4% monthly (maintaining the liquefaction of fixed terms) compatible with an inflation of 4/6% monthly and, basically, that the dollars from agricultural exports appear.
One piece of information that convinced Caputo was the 15% increase in the volume of loans in pesos at 23/24% annual rates, an indicator that producers would be taking loans to finance the delay in liquidation soy and corn.
In the financial market they calculate that more than half of the harvest (equivalent to about US$ 19,000 million) It’s in the silosor in the silo-bags, without setting prices while waiting for some improvement.
Both Milei and Caputo insist that there will be no devaluation And to this was added the minister’s refusal to modify the blend dollar (80% official dollar and 20% counted with settlement for exports).
With the devaluation at 2% monthly and keeping the blend dollar unchanged (it has the advantage that supply in the free market increases, but it reduces the purchase of Central reserves), a more robust interest rate will try add attractiveness for producers to liquidate foreign currency.
The government had committed to the Monetary Fund to eliminate the blend dollar this month, but Caputo, when speaking that they will negotiate another agreement with the organization, seems to have other times in mind.
After approval of the Base Law, of the refinancing of the US$ 5,000 million of the china swap and with the announcement that Rates in pesos will play a more leading role, the scenario of exchange stability gains space.
The stabilized dollar made its contribution to lowering inflation in May and had the cost of stopping the purchase of dollars by the Central Bank to strengthen its reserves.
Like all governments, Javier Milei’s is moving in the short term to shore up the stability of the dollar by all means.
And, if the minister’s word is fulfilled, now we will have to wait the reduction from 17.5% to 7.5% of the Country tax rateso questioned by companies.
It would be a powerful signal in a supposed path to the lifting of the exchange rate, but it is still unknown how the Treasury will compensate for the decrease in that income.
