In the first round of the week after the XXL holiday, the blue dollar is sold this Monday with a rise, to $1,320 in the caves of downtown Buenos Aires, marking a new intraday nominal historical high. In the stock market segment, The dollar counted with settlement is traded at $1,003; and the MEP is offered at $1,286.
According to experts surveyed by iProfesional, after the publication of the IMF report, corresponding to the eighth review of the agreement with Argentina, several factors have been revealed that indicate the possibility of an exchange rate devaluation. Although the organization has praised the government’s achievements in areas such as reducing inflation and improving the Central Bank’s assets, they mark important risks in the strategy of the economic team led by Luis Caputo.
The IMF suggests that The BCRA must maintain positive real interest rates, which implies rates higher than expected inflation. Furthermore, it points out that the equilibrium exchange rate estimated by the IMF is significantly higher than the current value.
For this reason, analysts interpret that for the Fund the current monetary/exchange policy is unsustainable, so – as the stocks are lifted – the exchange rate could gradually rise, and Argentina will have to converge towards a managed floating regime. , similar to that of Peru and Uruguay. Coin competition will be key in this scenario.
On the other hand, they warned that The maturity profile and financial needs in foreign currency for the coming years are high. The IMF has pointed out divergences between its evaluation and the government’s exchange rate and monetary policy. The gap between what is indicated in the review and the official discourse raises doubts about new IMF disbursements.
For many experts, Luis Caputo’s strategy is “risky”
The risks that the IMF sees in Caputo’s program
According to the consulting firm Equilibra, The IMF published the report of its technical staff (staff report) that contains the evaluation of the Argentine economy corresponding to the eighth review of the agreement, which enabled the disbursement of some US$800 million. The ninth review is scheduled for August, but it will most likely end up taking place in September and with it, if favorable, some US$520 million would arrive.
According to analysts, The staff was complimentary about the achievements achieved since Javier Milei’s government took office. and highlights in particular the “impressive” purchase of dollars by the BCRA, the “significant” reduction in the exchange rate gap, the reduction in inflation, the sharp drop in country risk, the improvement in the Central Bank’s assets.
However, they explained that the central issue for the progress of the program is that the fiscal adjustment be sustained over time, so that Argentina can access the capital markets at the end of 2025 and, so you can start paying the IMF from the end of 2026when the debt with the organization begins to mature.
According to the consultant, the risks that the staff sees inhabit three dimensions: i) social: they fear that the adjustment will be too harsh and that the government will lose social support; ii) politics: fears that the political system – mainly, Congress – may block the economic program by not approving laws or proposing others that increase the deficit; and iii) the fiscal: fears that the 2024 adjustment – based on transitional measures, such as the PAIS Tax on imports – cannot be consolidated in 2025 and beyond.
Profile of maturities and challenges ahead
According to a report from the Aurum stock exchange company, financial needs in foreign currency for the coming years will be highgiven that the IMF data from this latest review have worsened the result of the external current account for goods and services.
For this reason, they anticipate “quite difficult” for there to be new disbursements from the IMF considering the divergence between what is indicated in the review regarding exchange and monetary policy and the government’s discourse on these issues.
The IMF is concerned about the exchange rate delay in Argentina
“Among these divergences we highlight what would be the failure to comply with the commitment to abandon the Blend dollar at the end of June, the importance that the IMF gives to the short-term positive real rate, the incipient exchange rate delay that would have begun in April or the waiver with an expiration date that the Executive Board (the board) should have given to eliminate the multiple exchange rate policy (must expire at the end of January 2025)”, they indicated.
For the broker, if the government intends new disbursements, all these points should be addressed prior to this possible new agreement. Probably, they pointed out that even without new cash a rescheduling of maturities should be preceded by substantial changes in those policies.
“The contractual interest to expire for current foreign currency debt has a downward bias due to the restructuring of Guzmán with very low interest coupons that, even if the country risk falls sharply, will imply issuing debt at rates well above the current ones, which will pose new challenges for the coming years,” they concluded.
Why is a devaluation anticipated?
According to Equilibra experts, there is a devaluation ahead, given that there is an aspect that overshadows the staff’s analysis that is not said openly: monetary/exchange policy is on an unsustainable trajectory.
“Technicians warn that the BCRA must from now on maintain positive real interest rates; that is, rates higher than expected inflation. More importantly, the organization places the equilibrium exchange rate at values that at the end of May would be equivalent at an official exchange rate around $1,150; that is, about 30% higher than the current value,” they explained.
According to the consultant, The Fund understands that Argentina has to live with a current account surplus in the balance of payments for the next few years.; Simplifying, with exports that greatly exceed imports, which implies that, between now and sometime in 2025, the exchange rate should rise above prices and salaries.
“The IMF suggests that this change could occur gradually as the government lifts the stocks. This would imply greater demand in the exchange market which, in a scheme of greater flexibility as requested by the organization, the exchange rate would go up,” they observed.
On the other hand, they pointed out that the staff indicated that the monetary/exchange regime to which Argentina should converge as the stocks are lifted is one of managed floating, similar to the one Peru and Uruguay have, because implies a “coin competition.”
How much is the blue dollar trading at today?
The blue dollar is located at $1,320 for sale and $1,290 for purchase.
How financial dollars operate
In the stock market segment, the dollar counted with settlement is traded at $1,303 and the MEP is offered at $1,286.
What is the price of the official dollar
The price of the retail dollar of Banco Nación starts at $927.
The wholesale dollar is trading at an average of $909.
For its part, the solidarity dollar and card dollar stand at $1,483.20.
The exchange gap
Finally, the exchange gap between the wholesale dollar and the different exchange rates is as follows:
- Blue: 43%
- LCC: 42%
- MEP: 30%
