The noise around a possible devaluation or exchange split As an inexorable resolution of the financial crisis, it has left other issues in the background, which, however, also appear in the menu of emergency measures. A clear example of this is the interest ratewhich continues to be strongly negative, contrary to the commitment assumed with the International Monetary Fund.
And the strange note of the last few days is that the claim for a rise in rates It is no longer restricted exclusively to “orthodox” economists, but from Kirchnerism itself, complaints are beginning to be heard about the existence of a state subsidy for the same businessmen who demand foreign exchange.
The debate intensified after the escape of the blues and the news about the volume of soybean retained in the silobags. According to estimates from the Chamber of the Oil IndustryThis stock amounts to about 29 million tons, which at today’s price is equivalent to about US$15,000 million.
The protest that is being made internally by the Government itself is that those same rural producers – for whom there is speculation with some incentive measure that would imply a loss of tax revenue – are benefiting from active rates of around 60% per year in the banking system. Given that the inflationary expectation is already well above 80% for the year, this implies that the agricultural producer, when deciding how to finance the costs of the next campaign, has a greater incentive to borrow in pesos than to rush the sale. of soybeans.
New reason for internal fight in the Government: are the same soy growers who retain product in silobags benefit from subsidized credit?
The temptation of collateral credit
And, in fact, the purchase of agricultural machinery is one of the items that is growing, hand in hand with financing. The most recent statistics, corresponding to the first quarter, show that, measured in number of units, the sale of harvesters grows 43% year-on-year, while tractors grow 26% and seeders 19%.
In the same way, buyers of high-value consumer goods, such as cars, are benefiting. A situation that has as its protagonist an upper-middle class that, simultaneously, acquires dollars for hoarding or for vacations.
“Dealerships are getting out of stock more and more because people understand that it is still an excellent time to buy cars, motorcycles and agricultural machinery. The moment of opportunity is now”, argues Richard SalomePresident of PROGRAMthe union of automobile dealers.
And despite the difficulties that the restriction of dollars implies for the industry, and that it is slowing down supply, especially in the category of zero kilometer cars, the manager is optimistic about the possibility of selling 400,000 units this year -a figure modest in historical terms, but that would imply an improvement of 5% compared to last year.
The latest numbers on pledge credits they give the guideline of how the rates are turning out to be attractive for users, especially when it comes to buy durable goods that, at the time of economic evaluation, are valued by Argentine society in terms of dollars.
Speaking in numbers, while the number of cars sold shows little variation compared to last year, pledge loans to purchase new vehicles rise to 13.4% per year. And the phenomenon is particularly visible in the used car market, where garments grow at a shocking 38%.
Thus, the consultants are recommending their clients to take credit to finance working capital, and they argue that it is a more convenient option than selling dollars.
“I would exhaust all instances not to sell any type of merchandise, including dollars, first would take financingsince rates are negative against inflation,” graphics savior di stefanoone of the most influential consultants in the agricultural field. His argument is that both machinery and vehicles and property are “on sale” when considering their dollar value.
The internal debate of the Government on the interest rate: do they rise to stop the run on the dollar?
Rates: from recessive instrument to stabilizing measure
In other circumstances, this situation would have been a cause for celebration for an economically ‘Keynesian’ oriented government. In fact, the IMF’s requirement that interest rates be positive was one of the strongest motives for Kirchnerism when the terms of the agreement were announced.
After all, that commitment made by Martin Guzman It did not differ from the one that, during the macrista management, had assumed the then head of the BCRA, guido sandleriswho in his zeal for the monetary cut had taken the rate above 70%.
However, as the shortage of dollars in the coffers of the Central Bank worsened, this ideological rejection of positive real rates began to be the subject of review and debate, to the point that today also from the official internal it is proposed that a rise of rates could imply beneficial effects.
Although the fear persists that activity will cool down in the second half of the year – the main argument used up to now to justify negative rates – the idea is now prevailing that this would be the “lesser evil” to pay to alleviate the problem of shortage of foreign exchange and eventual devaluation.
A report by PxQ, the consultant for the “ministerable” Emmanuel Alvarez AgisIt states that the crisis has been aggravated by erroneous decisions of the Government, and highlights the interest rate as the center of this situation.
“Monetary policy seems stubborn in giving away the pesos with which runs are made on parallel dollars. It is observed that the BCRA’s monetary policy is completely expansive, with interest rates in negative real terms in the order of -35%/ -40% per year”, points out the influential economist.
And he argues that, in this context, it is the Central Bank itself that is financing the run: “In addition to having a expansionary monetary policythe configuration of monetary and exchange rate policy implies that the optimal response of the private sector is take pesos not to sell dollarsor take pesos to buy dollars: the rate of devaluation is permanently above the rate of inflation, a difference that grows over time”.
In the midst of the escape of the blue dollar, the debate on whether a rate hike is the way to stop the run heated up in the ruling party
The truth is that the need for an adjustment with classic components, beginning with an increase in the official exchange rate, as a way of reducing the gap with the parallel dollar, which at the time sharpest of the run reached 160%.
“It should also include some deindexation scheme to curb inflationary inertia and a long period of positive interest rates to retrieve the weight value. Obviously a program of this type initially means a brake on the economy, but the brake is in turn necessary to accumulate reserves, which will be the guarantee that the plan works,” said the economist Claudio Scalettaone of the most influential among the consultants close to Peronism.
On the other side of the counter, the consultants closest to orthodoxy point out the urgency of measures in the same direction. By case, Ecolatina highlights that, with $950 sold when there are still five business days left to end the month, the Central Bank is going through one of its worst capital outflow situations since the winter of 2020.
“Fiscal and monetary measures (and, probably, overreactions on this matter) may be necessary to stop the run on the exchange rate,” adds the consultant’s report.
Central Bank under pressure
So far this year, the Central Bank he already tweaked the interest rate six timesbut it always had to “run behind” inflation, so yields failed to stay in positive territory.
To the surprise of the market, did not raise the rate after knowing the inflation data for June. This gave rise to versions of a dispute between the head of the Central, Miguel Pesceand the resigned Guzmán, who stated that the expectation of rate hikes played against the possibilities of “rolling” Treasury debt maturities.
Miguel Pesce and Silvina Batakis, faced with the dilemma of making a monetary tightening or maintaining low rates to promote productive activity
The truth is that the Central communicated a week ago the implementation of a “rate broker”where the floor will be marked by the “passive passes” -bank deposits in the BCRA- and the upper one by the Treasury bills.
From Pesce’s point of view, this measure meets the requirements of helping the Treasury in its auctions -preventing the bonds from suffering competition from the Leliq- but, at the same time, marks a willingness to converge on the field of positive rates.
However, given the worsening of the exchange rate tension, pressure has been renewed for the reference rate to suffer an increase that implies a signal to the market to mitigate the inflationary impact and the fall in the demand for money.
And, of course, to the claim of the local market is added that of the IMF, whose director, Kristalina Georgievahas just analyzed the economic situation together with Silvina Batakis. If the minister took care to make it clear from the first day of her administration, it is that she intends to respect the terms of the “stand by” agreement. But, for the time being, the suggestions of keeping the interest rate in the positive field and not incurring in exchange arrears are already being breached.