2024-01-20 20:23:14
The Government turned on the “peso blender” since it took office and sought to significantly reduce the real power of the local currency due to the effect of inflation and the lack of investment instruments that protect capital from rising prices.
Even before actually arriving at the Casa Rosada, Javier Milei began to talk about the need to resolve the monetary surplus in the economy as a preliminary step to the unification of the exchange market -whether that means only lifting the stocks or dollarizing-.
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The thing is that the pesos issued by the previous administration generated several problems. On the one hand, they are fuel for the demand for dollars and inflation. On the other hand, without many alternatives, the pesos ended up deposited in banks that, at the same time, placed them in Leliq and passes from the Central Bank (BCRA), debt instruments that generated interest at high rates and thus fed back into the issue.
The Central Bank lowered the interest rate and reduced its debt in real terms. (Photo: AFP).
“Forty days after the beginning of Milei’s management, the monetary mandate seems to be clear: liquefy the entire stock of debt in pesos as much as possible,” said GMA Capital. Regarding the effect on the money circulating in the economy and bank reserves, the company calculated: “Assuming an inflation of 25% for January (REM), the monetary base liquefied 14% in just over a month.”
The “blender plan” that Luis Caputo launched as soon as he arrived at the Treasury Palace began with the elimination of the Leliq and the lowering of interest rates on repos. GMA Capital estimated that, despite the nominal growth, the stock of remunerated liabilities of the BCRA fell 25% in real terms in the last two months.
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At the same time, the Treasury debt significantly reduced the rates it pays in each tender and the remunerations for fixed terms became strongly negative, which led to a fall in the stock of deposits. “The ‘overhang’ liquefaction strategy [resaca] of pesos had the effect of real interest rates at record negative levels. Historically, the dollar has been a natural refuge in high inflation scenarios with few possibilities of coverage,” Consultatio analyzed.
The risk of the gap, getting closer
Precisely, with the liquefaction at full speed and without alternatives to protect the pesos in an economy in which the exchange rate trap is still in force, the main danger of the “liquefier plan” is the widening of the exchange gap.
In the last week, the MEP dollar rose 14% and the cash with settlement rose almost 15%. (Photo: Adobe Stock)
During the first weeks of the year, that risk did not materialize: financial dollars remained relatively calm due to the increased demand for money typical of December and early January. However, the trend has already begun to reverse. In the last week, the MEP dollar rose 14% and the cash with settlement rose almost 15%. The gap, which had reached 10% at the end of the year, widened and closed above 50% on Friday.
Read also: Due to the exchange gap, the market is already preparing for an increase in the official dollar in March and April
“After a few days of respite, cash with settlement was once again the protagonist and has accumulated a rise of 47% since December 27. It is a very strong and very rapid increase, even measured in the historical perspective of the demanding Argentine standards,” said Consultatio.
Javier Milei expressed on several occasions that before moving forward with exchange rate unification, he had to resolve the surplus of pesos in the economy. (Photo: NA).
The brokerage house completed the panorama of uncertainty that led to the overheating of the financial dollar. “The fact that the Government has maintained practically all the exchange restrictions introduced by the previous administration even when the gap reached 9% was not a good sign. The market interpreted that even in unbeatable conditions to unify the exchange market, the Government preferred to maintain the stocks,” he explained.
Along these lines, the widening of the gap and some official statements that put dollarization back into the public debate play in favor of the rise in the financial dollar. “Today, with a gap greater than 50%, exit from the trap seems much further away, more expensive and more uncertain. Advancing the dollarization of portfolios with surplus pesos in this context is the most obvious option,” Consultatio closed.
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