So far in December, the BCRA had to pour more than expected into the market. With a new record operated by importers, expect an improvement
This Friday, the BCRA lost US $ 140 million in the foreign exchange market and, thus, has sold US $ 200 million so far in December, as it bought $ 10 million on Wednesday and sacrificed $ 70 million on Thursday.
According to sources from the economic team revealed to iProfesional, the third day of December “was a day with a level of record activity in that square “, where operations were registered for US $ 1,031 million, thus exceeding the ceiling of US $ 952 million that had been reached on November 12.
It is worth mentioning that the average volume of the market in November was US $ 829 million, well above the annual, which is estimated at US $ 334 million. Thus, the BCRA observes with concern the high level of liquidation of imports of the day and expects to normalize operations in the coming days.
The fine harvest will bring relief to the BCRA but the liquidation has not yet begun.
When does relief come?
Likewise, it has its eyes set on accelerating the start of export liquidation of the fine harvest, which usually occurs between December and March in Argentina. The monetary and financial regulator expects to pocket US $ 3.5 billion this month in this way. Although this will not solve the current delicate situation of the reserves, it will help to rebuild them in part and it would also reduce the need for intervention by the BCRA to compensate for the high imbalance between expo and tax.
But settlement has not yet arrived, even despite the strong rise of commodities in the world in recent weeks, driven by strong demand from importing countries and by the rains that are registered in Australia (producer country) that have an impact on the quality of the harvest. Thus, on December 2, in Chicago, wheat rose US $ 10 to US $ 296 a ton and the price of soybeans also recovered and climbed US $ 6 to US $ 457.
These numbers would make the liquidation of the harvest more attractive for local exporters. However, it is delaying the liquidation and that is also a symptom of the devaluation expectation that exists today.
How is this? The economist Jorge Neyro recalls in this regard that, “Until now, the Government used the exchange rate and the freezing of rates as almost the only price control tool. “But, he warns that” that did not work because inflation continued at a rate of around 3% per month while the exchange rate appreciation continued to 1% per annum “.
Thus, the appreciation of the exchange rate throughout 2021 was almost 20%. “This cannot be sustained any longer because the exchange rate evolution produces the daily drainage of reserves from the BCRA,” warns Neyro. So, he considers that, even if the Government does not want to, it will have to devalue faster since, otherwise, the evolution of the dollar will be unsustainable. And, in response to the initial question, they warn that, if progress is not made on that path, “there will be no incentives to liquidate exports and that will further complicate the external accounts,” he anticipates.
And the BCRA is aligned in this regard. It should be remembered that, as highlighted a Consultatio report published this Friday, “the head of the Central Bank gave signs that the current semi-fixed exchange rate scheme (1% monthly devaluation with annual inflation above 50%) is not sustainable.”
Pesce has already anticipated that the devaluation policy will change.
The acceleration of the dollar will come: the question is when
From Consultatio, they explain that Miguel Pesce’s plan is to gradually increase the rate of devaluation, but without making the peso attractive (which would imply a rise in interest rates, which the Government for now refuses to implement, although the market is is suing it).
In that sense, from the consulting firm, they warn that, given the speed of financial deterioration, the chance that an exchange rate jump can be avoided Before the government can formulate a plan to contain its effects it is increasingly difficult.
Neyro also foresees that the government will accelerate the devaluation, at least at a rate similar to that of inflation. However, he notes that It is still not clear what will happen in December with that strategy because Pesce did not specify well when he is going to start with the new policy or at what pace he is going to do it.
The market, then, is on the lookout these days, just like the exporters, who are waiting for the next move to move forward with the liquidation, since what the BCRA president defines will depend a lot on what deadlines are achieved. to some kind of stability in the real exchange rate, something that Argentina needs to be more competitive in the international market and that the IMF requires as part of the economic normalization process.
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