Without liquid reserves, for the Central Bank to regulate the “cash with liquidation” is a losing battle

The dialectical offensive Alberto Fernandez against the “speculators who make the dollar rise” provoked all kinds of speculation in relation to possible obstacles to the functioning of the market known as “counted with liquidation”. The battle, however, is lost in advance. Without liquid reserves plus the prohibition imposed by the IMF to apply the few that remain to intervene in the bond market, the chances that the Government has of successfully intervening in this market are practically nil.

The President’s specific and public criticism of the “cash with liquidation” was added to newspaper articles that over the weekend expressed the discomfort of the Casa Rosada for these supposedly speculative operations. The Cedear (certificates of foreign companies listed on the local Stock Exchange) were even mentioned as a vehicle to withdraw dollars.

The implicit price of the bonds that show the price of the “cash with liquidation” was down at the start of the day, in parallel with an apparently calmer day on Wall Street. But After the expressions of Alberto Fernández, he turned around and closed at new records, close to $ 304. This is the exchange rate that companies seeking to get out of pesos and take dollars abroad would have to pay.

Possible additional restrictions to operate in the “cash with settlement” market would be of little use to reduce the gap. And it could be dangerous because it would leave more pesos without a clear destination in the market, putting even more pressure on prices.

One of the typical measures to hinder this operation is known as “parking lot”. This is the obligation that is imposed on investors to compulsorily keep bonds in local currency before moving to bonds or assets in dollars and then turning them abroad. In those days of waiting, an exchange risk is assumed, so the objective would be to discourage the flight of foreign currency abroad. In the past, daily quotas were also imposed to reduce the volume of the “drip”.

However, a fundamental leg to avoid an escalation of financial dollars is the Central Bank’s intervention in the bond market. And for that it is necessary to have dollars, which are not there today. Furthermore, the commitment to the Fund is that the scarce reserves cannot be used for this purpose.

Added to the newspaper articles and the President’s own expressions was the change in the National Securities Commission. Yesterday, the new president of the organization, Sebastián Negri, who replaced Adrián Cosentino, appeared before the stock market authorities.. That change was interpreted by some market players as an attempt to tighten regulations on stock operations that impact the exchange rate.

The exchange rate gap thus remains at levels of 130% and for now the possibility of a decrease as it happened from October 2020 is not in sight.

Yesterday Negri and Cosentino appeared together as part of the transition and spoke of “continuity”. There was no mention in the meeting about possible measures that impact the operation of the “count with liquidation”. Of course, it was neither the scope nor the time to announce it.

“The problem that the Government has is not the one with liquidation. What generates exchange rate pressure is mistrust and especially the fiscal deficit. As long as the government does not address these issues, there will be no peace on the exchange front”, he told Infobae one of the participants in yesterday’s meeting representing the private sector.

The exchange rate gap thus remains at levels of 130% and for now the possibility of a decrease as it happened from October 2020 is not in sight. Now the deterioration is greater than at that time, the BCRA’s reserve situation is also more delicate and inflation is much higher.

Investors are increasingly betting that it will happen a discreet jump in the official dollar as a way to reduce the exchange rate gap. Logic would indicate that this adjustment should happen as far away as possible from the presidential elections. However, for now both the head of the Central, Miguel Pesceas the Minister of Economy, Silvina BatakisThey strongly deny this possibility.


The BCRA sold 130 million dollars in the foreign exchange market, half of the volume operated
Alberto Fernández targeted those who buy dollars to travel and legally transfer foreign currency abroad
Counted with liquidity in the sights: three negative scenarios for the Argentine economy if restrictions are further increased
Dollar today: the “counted with liqui” reached a record of $305 and the exchange rate gap approached 140%

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