Measured by cash with settlement, the country’s exchange rate is the one that has risen the most in the world so far in 2020. The latent problems
The exchange rate situation in Argentina It remains complex due to the gap between the official dollar (inaccessible for savings) and the parallel (free and legal, but under official threat). Meanwhile he crawling peg or smooth sliding of the banknote in the formal channel that makes the central bank ceased to be effective due to the rise in alternative exchange rates, some ask that Michelangelo Pesce accelerate the rise of the spot.
Beyond that, which could bring other complications, the truth is that the exchange rate in Argentina rises at an accelerated rate. In fact, measured by the exchange rate that arises from the cash settlement (CCL), Argentina leads the world podium.
According to calculations of GMA CapitalIn the ranking of the currencies against the dollar in 2020, the Argentine peso is the most devalued. The variation of the exchange rate so far this year in the different countries is as follows:
one- Against the Argentine peso (measured by the CCL) the dollar rises 49.4%.
2- The greenback against the Brazilian real climbs 39.3% (on Friday it closed 5.58 reais).
3-The exchange rate in Russia (read, versus the ruble) rises 36%.
4-The dollar against the Mexican peso appreciates 32% in these first months of the year.
5-The US currency it gains 23.4% versus the Colombian peso.
Of course, the official exchange rate (as it was said, inaccessible to any mortal) rises 11% so far this 2020, which somehow reflects a certain “backwardness” in comparison with the region’s currencies.
Furthermore, the problem for Argentina is how the gap between the official and the parallel value was exacerbated. Taking the CCL the distance with which the BCRA “sells” is 68.5%. Although the cash with liquidation rises 50 percent this year, adding what happened in 2018 and 2019 already almost climbs more than 85 percent.
Of course, the big question is where the financial exchange rate can go and how far the gap would go. In its weekly report, Delphos Investment says that – based on some assumptions and simulations – the “cash-in-liqui” could reach a level of 140/160 pesos per dollar by the end of the year.
“If the depreciation rate of the official exchange rate allowed to raise the price by $ 80 by the end of the year, then we would be talking about a gap level of between 75% and 100%”, estimates Delphos.
Is it possible to live with this level of gap? The consultancy believes that in a macroeconomic context such as the current one it would be feasible to do so temporarily.
“The huge trade surplus, the current strong financial repression, the low level of monetization of the economy (a lot of transactional money), the few payments abroad as debt (either due to falling into default or the null payments of the proposal made ) and the lack of demand for tourism dollars, among others, would allow the Government to carry out a strategy of accumulation of International Reserves (RRII) with few negative impacts in the short term“, enumerates.
The problem, obviously, is that exporters would lose part of their profitability due to the gap, making it unsustainable in the long term.
Something that could further widen the gap is the debt situation. Interestingly, it went up after Martin Guzmán unanimously presented a proposal rejected by all groups of bondholders.
Emmanuel Álvarez Agis, the head of PxQ and economist who was close to occupying a position in the Alberto Fernández government, says that the biggest impact of a default in Argentina would be felt in a widening of the exchange gap..
Other economists, like Rodolfo Santangelo (the partner of Carlos Melconian) are concerned about the mega emission of pesos. “The longer the quarantine lasts, the more pesos will have to be issued”, He says.
And those pesos have only one destination: the parallel dollar. Low interest rates in pesos do not help in the fight against the green currency. The central bank, who now wants to lukewarmly reverse the situation, finds himself at a crossroads. Banks offer rates of 26% or 30% with inflation calculated at 50% this year. In other words, rates 20 points below the expected CPI.
This was caused by the sharp drop in monetary policy rates of the Central, which pays for the Leliq 38% annually. No one knows what the exit will be so that the gap does not extend a little further.
Some, like the national deputy for Let’s Change Luciano Laspina (who is also an economist) believes that the exchange gap above 70% is unsustainable. And so postulates that the Central Bank should open a transparent bidding mechanism for the sale of financial dollars.
“I would buy commercial dollars at 65 pesos and sell them at $ 100, absorbing pesos to offset the coming emission tsunami,” he says. All ideas that, for now, are not part of the official menu.
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