What can the Central Bank do to stop it?


The “machine” of pesos that the BCRA put into operation explains the abrupt jump in cash with liquidation. What alternatives does Pesce have

City economists agree that the emission “little machine” of the Central Bank (BCRA) is one of the explanations of the abrupt jump that had the cash settlement this week. Only in March, the monetary base grew 34% and one of its consequences was that the stock exchange rates passed the barrier of $ 100 and operate comfortably in values ​​close to $ 110.

For now, the BCRA opted for vacuum a part of the injection weights in yesterday’s Leliq tender, in which $ 120 billion matured and took $ 300 billion. This operation resulted in a monetary contraction of around $ 180,000 million -without taking into account the interest. Since January, when it was in the process of disarming passive passes, the agency did not aspire as many pesos in a tender.

In this framework, economists consulted by iProfessional They considered the monetary policy alternatives that the Central could take to discourage dollarization and re-incentivize individuals and companies to stay in local currency.

Reactivate credit

Much of the injection of pesos that the BCRA made in recent weeks had to do with the forced disarmament of Leliq that the organism made with the aim of releasing $ 300 billion for banks to allocate loans to MSMEs with a 24% rate promoted by the Government.

Matías Rajnerman, Ecolatina’s chief economist, referred to that point: “The BCRA is not renewing the Leliqs so that the banks lend those funds but they do not want to do it because they are afraid that all that money will default, even at such a low rate. So they kept the cash and they are not even interested in taking fixed terms, because they do not want to have immobilized capital. ”

Although the official objective is to place $ 320,000 in loans to MSMEs, according to the latest official information, for now there are only loans approved for $ 66,182 millionof which $ 43,298 million were disbursed, that is, 14% of the quota.

Reactivating credit is key to slowing the escalation of the dollar

That is why economists also point to the need for strengthen the credit channel so that the pesos do not remain in the banks and end up generating upward pressure on the stock market dollar. “If from the government they are really willing for these 24% loans to come out, perhaps one way out is that the BCRA guarantees a portion of the loans, “suggested Rajnerman.

A report by Ieral also highlighted the importance of achieving “capillarity in the distribution of credit”, for which urgent “State capitalization to the Reciprocal Guarantee Societies (SGR)“in order to avoid an excess of monetary issue.

Along these lines, the Government launched the official guarantee system for MSMEs seeking financing through the Argentine Guarantee Fund (Fogar). In the organization led by Miguel Ángel Pesce they hope that this mechanism become dynamic in the coming days and financing reaches MSMEs.

In fact, as reported by the BCRA, the Fogar has already granted guarantees for financial institutions to have new loans for $ 89,073 million. In addition, from this week the SGR was included among the activities excepted from quarantine.

Raise the cost of money

Since Pesce became president of the BCRA, the benchmark rate has lost 25 percentage points. Thus, the performance of the Leliq went from 63% to 38%, what lowered the cost of money and, therefore, credit.

Pesce himself has said on several occasions that he does not believe in the direct effect of the interest rate to control inflation or tame the appetite for dollars. In fact, in public statements this morning, the BCRA president attributed the shot in cash with liqui to a “speculative maneuver”.

However, some of the consulted economists consider that a rate hike could help to moderate the rise in the exchange rate, even when more expensive credit for individuals and companies. Other specialists are inclined to rebuild the Leliq stock without touching its current performance.

“Should raise the rate, which does not seem to be on the menu. It would also be good to start giving precisions in the economic. The focus on health is perfect, but you have to start giving details about when and how it will come out. Otherwise, they are all unknown and in Argentina, the less we know, the more dollars we want, “said Gabriel Caamano, partner at Consultora Ledesma.

The rate hike, decisive to detract from the green ticket dynamism

In the economist’s view, the focus should be more on the rate level than on bank liquidity. “They are emitting a lot of deficits and a lot of what they injected through Leliq did not reach the street but remained in the banks. The BCRA wants banks to lend more and faster. That is going to amplify the impact of the broadcast“, Held.

“In this context, the most logical way to prevent the pesos from going in cash with liquidity or the Mep dollar, is to raise the rate,” Caamano concluded.

For her part, Mariela Díaz Romero, senior economist at Econviews, agreed that “the BCRA has tools to limit the rise in liquidity in banks, which is what generated the sharp fall in interest rates and the soaring of cash with liqui. “

“Those tools are better remunerate the pass rate or raise the monetary policy rate to tend towards an increase in the savings rate for depositors. However, it is not clear to me that the BCRA wants to restrict liquidity at the moment, rather the contrary, it wants credit to increase, “he said.

Rajnerman, on the other hand, considered that before increasing the rate, the BCRA would have to target rearm part of the Leliq stock, which fell $ 330 billion since the beginning of the quarantine.

“It seems that it is not so much about raising the rate but rather that the BCRA validates the demand for Leliq and don’t leave them in cash so they can go on loans because, obviously, at these rates banks do not want to lend“he pointed out.

The economist explained that, on the other side of the equation, if the banks are very liquid in pesos they don’t want to take fixed deadlines and they lower the rates at which they pay depositors, who are thus driven to dollarize through the dollar exchange.

“The opportunity cost of going cash with liquidation is practically nil. The fixed term yields 20% per year, that is, below 2% per month. In a couple of hours, you earn with the cash with liquidation the same as with a fixed term of 30 days, “he stressed.

Pressure on the dollar

Although the impact of the spike in cash with liqui on the official exchange rate is not immediate, it is a risk to be taken into account and that is why the BCRA began to absorb pesos this week.

“Undoubtedly the rise in cash with liquidation puts a lot pressure on the official exchange rate, which is falling further behind in real terms. The Brazilian real depreciated 30% so far this year and the peso, 9%, “Díaz Romero said.

And he proposed: “To narrow the gap and reduce the possibility of an abrupt jump in the dollar, the BCRA can collaborate depreciating the official exchange rate more quickly, at a rate of 4% per month. That way, you can do it slowly and retain your nominal anchor. If it were to jump, the exchange rate would lose strength as an anchor. ”

The rise of “cash counted” puts pressure on the official dollar

Regarding the effects on inflation, Díaz Romero acknowledged that “the Government has in its favor the price controls, the fall in the international price of oil and the absence of surveys for quarantine” and that “the transmission mechanisms of the rise of the liqui to inflation are not immediate. ” However, he stated: “In the medium term, if the excess liquidity is not absorbed, it will go to prices

On this point, Jorge Vasconcelos, from Ieral, advocated mechanisms that reduce the risks of an inflationary acceleration and, therefore, suggested a foreign exchange market splitting “creating a financial segment, in which the Central Bank could sell dollars obtained on the commercial side, which aims to expand due to a fall in imports that exceeds that of exports.”

“There is scope for changes in the heading ‘dollar savings’ (less tax and a little more quota) and to channel operations between companies, in a financial channel similar to liqui, but more transparent and of greater volume “, finished the economist

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