Given the upward pressure of the financial and blue dollars, the market suggests that the Government’s foreign exchange strategy is coming to an end. With a gap approaching 50%, one report estimates that a reduction of 10 points in the PAIS Tax would allow the official exchange rate to be adjusted by 10% without causing major changes in prices.
Let us remember that financial dollars once again went through a volatile day this Tuesday, June 25. The CCL broke the streak of three increases in a row, but the MEP traded higher and exceeded $1,300.
The so-called “cable” dollar fell 0.1% (-$1.03) to $1,312.66, therefore the gap with the official exchange rate reached 44.1%. Last week said spread ended a round below 40%, something that had not yet happened during June. For its part, the “bag” rose 1.1% ($13.77) to $1,308.99. In this case, the gap climbed to 44%, a new maximum since February 7.
This upward pressure on financial dollars unleashed a whirlwind of speculation among investors about the future of the Government’s monetary and exchange rate policy. This is despite the fact that the Minister of Economy, Luis Caputo, insists that no changes are coming, the market suggests otherwise.
Among the most debated options is the possibility of accelerating the devaluation of the official dollar. Although during the XL holiday Caputo had to go out to stop the devaluation rumors and confirmed that the exchange rate would continue to adjust at a rate of 2%.
The gap: the big problem
However, the growing exchange rate gap, which has reached 50% in recent days, increases doubts about the viability of maintaining an exchange rate above $1,000. This Tuesday, all financial dollars closed above $1,300, with the blue dollar reaching a maximum of $1,365.
That’s when Delphos Investment’s comment appears, in a daily report, proposing an alternative plan that Caputo could consider tto reduce the PAIS tax from 17.5% to 7.5%. And the head of the Treasury Palace assured that this reduction will be implemented once the Bases law is passed, scheduled for discussion in Deputies this Thursday. This measure is expected to take place between July and August.
PAIS tax and official dollar
“A 10-point reduction in the PAIS tax would allow the official exchange rate to be adjusted by 10% without causing major alterations in the prices of imported products.“, they pointed out in Delphos. This would open the door to a controlled devaluation, balanced by the decrease in the import tax.
With a higher exchange rate, around $1,100, the “blend dollar” would lose its purpose. This would allow the Central Bank to recover more than US$1.2 billion monthly currently aimed at the stock market, facilitating the accumulation of reserves. In addition, one of the IMF’s demands to eliminate the “80%/20%” formula for the liquidation of exports would be met, according to the latest Staff report.
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In the coming weeks, the “second phase” of the Government’s emergency plan is expected to begin. The sanction of the Bases law and the fiscal package, which would contribute to the consolidation of public accounts, are fundamental for this process, whose final objective is to lift exchange restrictions.
At the same time, negotiations with the IMF for a new agreement have not yet begun and there is a risk that they will be prolonged. This reduces the possibility of receiving new funds from the organization to strengthen reserves and prepare for an eventual exchange float, which still has no date.
