In the midst of the expansion of the exchange gap, the market closely follows the dynamics of reserves. Between now and the beginning of August, liabilities with the IMF, bondholders, and other organizations mature and BOPREAL begins to be cancelled.
The rise of parallel dollars in recent days reflected underlying concerns in the market about the future of the exchange rate scheme. Although the Government seeks to downplay its importance and associates the expansion of the gap with the political struggle with the opposition, at the City tables they also focus on signs of exhaustion of the 2% “crawling peg”, spurred by the proposals of the International Monetary Fund (IMF). The most eloquent sign is the brake on the purchase of foreign currency by the Central Bank throughout June. With an aggravating factor: in less than five weeks More than US$4.5 billion of debt in foreign currency expires, which will add pressure to reserves.
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Just days before the end of the month, the BCRA barely managed to buy US$115 million in net terms. at a time when it should be adding between 15 and 20 times more due to the seasonality of the currency flows from agriculture. The difficulties began at the end of May: the matching between payments and imports actually made, a certain reluctance of producers to part with their grains and the liquidation of 20% of exports via CCL due to the validity of the dollar blendwas added the stagnation of bank loans in foreign currency, which had skyrocketed between March and April, and their mandatory liquidation had inflated the supply of foreign currency.
A report from the consulting firm CP explained the situation like this: “Since the end of May, the BCRA stopped buying dollars in the official exchange market and the recomposition of reserves stalled. The process corresponds to a certain exhaustion of the cycle of private debt (compulsive and voluntary) that drove purchases in the first part of the year.”
“At the same time, the jump in the exchange rate gap (to around 50%) and the tensions around the official exchange market set a limit to the liquefaction process. In this context, the Government took advantage of the decline in core inflation to announce the end of the period of negative rates,” added the report, which stated that two of the pillars of the economic transition (liquefaction and the accumulation of reserves) show signs of fatigue and the imminence of an agreement for more debt with the IMF “seems to have cooled down”.
The truth is that the net reserve goals reformulated by the Government and the Fund reflect that for the second half of the year a loss is expected for the Central coffers of about US$2.2 billion. That is why Luis Caputo and Javier Milei They were betting on getting fresh dollars from the organization to open the stocks without facing major shocks, but the IMF first demands that the skein of exchange regulations begin to be dismantled (in principle the blend dollar so that all the liquidation enters the reserves) and raise the rate of devaluation.
Dollar, debt maturities and reserves
In this framework, the moment of greatest concentration of debt payments in foreign currency of the year is approaching. From now until the beginning of August, you will have to face maturities of US$4,581 million
According to data from the Congressional Budget Office, on July 9 the Treasury must cancel US$2,558 million corresponding to the principal and interest coupons of the 2020 exchange bonuses. To this is added the equivalent of US$645 million of capital to IMF, corresponding to the loan of US$45,000 million that Mauricio Macri took in 2018, which will be settled with the special drawing rights (SDR) that the agency itself sent days ago after the approval of the eighth review of the current program. In addition, US$431 million expire with other international organizations.
Although it does not correspond to the debt of the Treasury but of the Central Bank, the payment of the BOPREAL with a first installment of around US$167 million. Finally, at the beginning of August a new interest maturity falls with the Fund for about US$781 million.
With this scenario, all eyes are on the economic team waiting for some movement either in the exchange rate scheme or in some type of incentive for agriculture to accelerate its liquidations.
