The financial market focused its attention on the evolution of the international reserves of the Central Bank (BCRA) and its ability to continue increasing them. This observation was intensified due to the recent movements of the monetary authority and the implications of current economic policy. Along with the legislative treatment of the Base Law and the Fiscal Package, the fate of the entity that leads Santiago Bausili When it comes to adding foreign currency, it has attracted all eyes since last week, in a climate rarified by local and American holidays, it had to sell a record amount for the era of Javier Milei.
In June, the BCRA’s reserve accumulation process experienced a significant slowdown, according to the consulting firm Outlier. Despite the favorable seasonality, the pace of purchases by the monetary authority was low. Until the middle of the month, the BCRA bought only 25 million dollars, a figure much lower than in previous months. This slowdown is worrying, since June is usually a strong month in terms of reserve accumulation.
“The single and free exchange market, although it had an atypical behavior as a result of it being a short week at the local level and also affected by a holiday in the US, drew attention to the strong level of sales that occurred on Wednesday and, even more so, the low accumulated pace of purchases by the monetary authority so far in June, a month that seasonally tends to be one of the most favorable in this regard,” the Outlier report noted.
““The slowdown in the reserve accumulation process adds more seasoning to the pre-existing anxiety in the market regarding the route and departure times from the CEPO (…) The outlook looks, at least, challenging,” added the same analysis. .
For its part, Portfolio Personal Inversiones (PPI) also focused on the fact that the BCRA sold 156 million dollars in a single day, the largest sale so far in Milei’s management. This massive sale occurred in a context of low private supply due to a holiday in the United States. Private demand, especially for energy imports, also increased, putting pressure on reserves.
“The reserve accumulation scheme with stocks is beginning to look exhausted with a supply that is no longer as tractional as before,” stated the PPI report.
“We wonder if the release of the stocks could be anticipated,” he added.
Another relevant point is the statement of the Minister of Economy, Luis Caputo, who reiterated that there is no devaluation planned and that the 80/20 blend continues with the endorsement of the IMF, despite what was indicated in the organization’s latest Staff Report. Caputo stated that negotiations with the Fund for a new program have not yet begun.
For his part, an analyst from the City of Buenos Aires highlighted the importance of closely monitoring the evolution of reserves and the BCRA’s ability to continue accumulating them. He pointed out that, although Argentina will have a current account surplus thanks to the fiscal adjustment, the goal of accumulating more reserves will require the inflow of capital and divestment if it wants to achieve its objectives. “You can’t ask much more from the trade balance,” he said.
In addition to the dynamics of reserves, this week the market will be attentive to the final text to be approved by the Chamber of Deputies on the Base Law and the fiscal package. The government will insist on the original version of the texts, with the reincorporation of the Income and Personal Assets reform being key. The signing of the commission’s opinion is scheduled for this Tuesday the 25th, and the session would take place on Thursday the 27th.
The future of the exchange rate and the accumulation of reserves will continue to be key to evaluating the progress of Caputo’s plan and market expectations in the coming months.
