This week the Central Bank of the Argentine Republic (BCRA)) disclosed its dollar futures sales holding in late July. To the surprise of the market, the BCRA’s short position closed July at about 7,000 million dollars, falling below the estimates of analysts who placed it close to 8,000 million dollars, but the data worries the main analysts of the financial system. But the good news for the government and for the financial market is that in August those sales would reach 6,000 million dollars.
yournorth personal portfolio report points out that “as expected, the monetary authority’s short dollar sales position accelerated sharply compared to June, when it was 4.3 billion dollars.
This marked a new maximum in the government of Alberto Fernández, surpassing the peaks of 5,683 million dollars in October 2020, where the gap had shot up to 130%, and 5,100 million dollars in November 2021 after the legislative elections.
The report also highlights that to find an amount that exceeds that value, you have to go to February 2016, when future dollar sales had reached $10.9 billion. That record of future sales was after the announced intervention of Alejandro Vanoli by the BCRA at the end of 2015. At that time, the Central Bank’s dollar position had reached a record of about 17,500 million in November with the aim of ending the term of Cristina Ferandez de Kirchner without devaluing and with a 50% exchange rate gap. The big question is how far that position will go after August 2023 when the PASOs are held prior to the presidential elections in October.
BCRA reserves: what happened in August
Apparently, in August the estimates of the BCRA’s short position in dollars would have been reduced to some 6,000 million dollars as a result of certain stability in the foreign exchange market after the arrival of Serge Massa to the Ministry of Economy.
Analysts on the local financial market and on Wall Street estimate that with the stock of futures sold by the BCRA for now, the monetary impact It would not be the main stumbling block to avoid a devaluation, as it was for the government of Mauricio Macri the sales of dollars in short futures in December 2015, which almost tripled the current one.
To the surprise of the market, the monetary authority’s short position closed the month of July at around 7,000 million dollars
“With this stock sold, a devaluation of proportions as 70% would imply an immediate monetary issue of some 680 billion, or 0.9% of GDP. Put in perspective, the rescue of the debt in pesos by the Central Bank in June and July demanded 1.5% of GDP. In the same way, a more limited devaluation, such as 40%, would generate an issue of 390 billion or 0.5% of GDP,” explains the Personal Portfolio report.
November 23, key date for the BCRA
On the other hand, it should be noted that despite the fact that the currency gap fell from fell from 150% to 120% with the arrival of Massa, the implicit rates in ROFEX futures contracts continue at very high levels, which indicates that the uncertainty about a future devaluation of the peso in the official market. The rates of the contracts from September to July 2023 remain above 95% with TEA above 105%. However, the implicit values of the August contract, which is the contract with the highest volume traded, were at a value of 61.5%.
With regard to the future financial market awaits a key date for the BCRA. Next September 23 will expire the term of the mandate of the president of the BCRA Miguel Angel Fishe, who will be appointed for another six years and also that of Vice President Sergio Wayosenchen and four more directors who are Zenón Biagosch, Silvia Berger, Betina Stein and Claudio Golombek.
On the other hand, there are 3 directors with a guaranteed mandate until September 23, 2025 who are the second vice president Jorge Carrera, Manuel Carreras Mayer and Agustin Datellis.
With regard to the continuity of Pesce, the president Alberto Fernandez He assured on Wednesday that he will continue to head the organization but there are doubts regarding his continuity.
The recent appointment of LIsador Cleriin the future he would be the vice president, replacing Arnaldo Bocco, it is a strong signal from Sergio Massa to remain in the future with the management of the BCRA. The other important position is that of the representative of the Ministry of Economy in the BCRA, which for now is filled by Finance Secretary Eduardo Setti, but there could be news in the coming days.
Pesce was ratified as head of the Central Bank by President Alberto Fernández
Lack of dollars: what about the settlements of the field
But one of the problems for the BCRA is that until now the government has not offered anything concrete to the countryside so that it canliquidate the approximately 20 million tons of soybeans that remain of the 2021/22 campaign. At the moment, the government has no answers for the field and the “soybean dollar” proposal, by which 30% is settled in dollar savings and the rest in pesos, does not excite the producer, he does not understand it and prefers to wait for better prices in the future Until now, only about 4 million dollars have been settled through this mechanism. In Chicago this week soybeans test $600 a ton again, while corn and wheat at $300.
By stopping the rumors of a liquidation of soybeans to the dollar, they are more an expression of wish than a reality. Soybeans today are worth $53,000, if they were sold at the stock dollar they would be worth $112,600. If this were to happen and 3 million tons would be liquidated at today’s prices, they would enter the coffers of the Central bank US$1,164 million and the entity would have to issue a whopping $349,200 million, which would represent 8.2% of the monetary base.
“This would imply that the Central Bank should absorb these pesos so that they do not generate a rise in market prices. This amount would represent 5.1% of the stock of Leliq and passes for which the Central Bank would pay a rate of 69, 5% per year,” he explained to iProfessional the consultant Salvador Di Stefano.
Therefore, the cost of buying some US$1.16 billion in the last 10 days with the current exchange and monetary scheme to increase reserves is very expensive for the government, given that it would have to issue a lot of money since economic agents do not want demand these weights and the BCRA should withdraw them by paying a very high interest rate in the financial market to the banks
In relation to the increase in BCRA international reserves dIt is The government is concerned about the increase in the trade deficit that measures the difference between exports and imports, since in July the second month in red was recorded, something that had not happened for many years. The increase in the trade deficit is perhaps the problem that most worries the economic team today, and it is a consequence of the increase in the exchange gap between the value of the official dollar and the alternative financial dollars, which reaches 120 percent. According to the INDEC, the trade balance registered a negative deficit of 437 million dollars in July, being the second consecutive month of negative performance.