A new day of BCRA sales (yesterday for USD 76 million) returned to focus the difficulties in continuing to accumulate reserves that the entity has. June marked a turning point in the trend of the first months of the year, when record purchases of more than USD 17 billion were recorded. The outlook for the second half of the year looks much more challenging and it is likely that net reserves will not increase or even fall in the coming months, given the large amount of payments in foreign currency that the Government faces.
In the last hours, voices of prominent economists such as Ricardo Arriazu, Carlos Melconian and Domingo Cavallo who agreed on one point: as things stand it is impossible to get out of the exchange rate trap. They even suggest that the lifting of exchange restrictions could take longer than expected and there is already talk that this could only be feasible in 2025.
The main reason is precisely the limited firepower that the Central Bank has, which managed to get out of negative reserves of almost USD 11,000 million to a slightly positive value. This means one’s own dollars remain almost zero.
The fact that the purchase of dollars has stopped in June is a very bad sign, because it occurs in the middle of the foreign exchange liquidation season for the heavy harvest. Going forward the outlook looks complicated, because in the second half the income of foreign currency from the countryside decreases and there are many debt maturities, particularly in July
The Minister of Economy has a strong challenge ahead of him, which is to recover the growth of reserves in the coming months. To the extent that he does not achieve it, not only will it be much more difficult to get out of the exchange rate trap, but it will also it will be difficult to lower the country risk below 1,000 basis points.
The IMF highlighted in its last staff report that the Government would abandon the “blend dollar” by the end of the month. This is the scheme that allows exporters to settle 80% through the official market but 20% directly in cash with settlement. This implies that a significant portion of the currencies that enter the market do not end up in the possession of the BCRA.
Luis Caputo, However, he confirmed late last week that the “80%-20%” will continue. And his version was that the IMF requested that the scheme be eliminated in June because the text was drafted in March, when it was estimated that the Bases law could be approved at that time.
But the truth is that the minister faces a dilemma, due to the short savannah that the Government must deal with. The continuation of the “dollar blend” implies that the Central Bank stops accumulating around USD 1.2 billion per month, which exporters directly transfer to the financial market.
Of course, this initiative, which was a decision adopted at the time by his predecessor in office, Sergio Massa, actually seeks to increase the supply of foreign currency and put a stop to financial dollars. Something that was actually achieved in recent months.
But this practice is in danger of becoming exhausted. Can the Central Bank continue to lose reserves in order to control the price of financial dollars? In the first months of the year this did not make any noise, because the purchase of dollars remained at a very high rate.
But now that imports are almost normalized, the market is unbalanced and that is why the accumulation of foreign currency has stopped.
The danger is that without this supply of additional dollars, the pressure on the exchange rate will accelerate, just at the moment when the liquidation of foreign currency from the gross harvest also decreases.
Economist Gabriel Caamaño warned yesterday about the complex outlook that lies ahead for the exchange market: In July more than USD 3,000 million must be paid due to maturities. It is difficult to accumulate reserves with pesos; it requires deferring payment of imports or adjusting the nominal exchange rate or the stocks themselves periodically.”
He also explained that the demand for dollars was “congested” due to the normalization of imports (since the effect of the deferral of payments in four installments was exhausted), in addition the blend regime for exporters continues and there was greater demand for foreign currency to purchase energy due to low temperatures.
