Dollar at 1000, smell of exchange delay, BCRA that accumulates reserves, activity that collapses, how does the movie continue? An old adage among market traders says: In the short term pay attention to what the (good) people do traders, who know how to read trends and money flows; In the long term, see what the (good) macroeconomists, who look at the general equilibrium, think. This tension between traders and macroeconomists is relevant to understand the exchange model implemented since December 10.
It is surprising that a government that is trying to change everything from the roots and that continues to promise to eliminate the stocks and even dollarize, for Now he continues with a scheme more typical of Massa than of Hayek. Far from being a criticism, it is a very good sign to be operating with this pragmatism because it recognizes that one of the many design errors of the December 2015 program was the very poor exit of the stocks, financed with the inflow of swallow capital, which laid the foundations for the subsequent collapse.
The chosen scheme is (short-term) ingenious. It simultaneously allowed reserves to be accumulated in a seasonal period that is not usually the best, to reduce the gap and until February to maintain the export exchange rate at a competitive level. The scheme blend 80/20 by which exporters can sell 20% of their currencies in the alternative market is the exclusive cause why the real value of the free dollar is almost half of what it was in October. The reduction of the gap is welcome as long as it is with sustainable mechanisms. The problem of blend It is bread for today and hunger for tomorrow.
If only 0.80 of the expos are going to go to the BCRA reserves, at some point the bleeding of reserves will return. Until now it has not happened, because the “new” post-December imports do not have full access to the official market either. In the first quarter they will be able to pay only 40% of the imported amount (which is also very low due to the recession), with the remaining 60% being new unpaid import debt. If the import blackout of 2023 (and part of 2022) was a disastrous inheritance from the previous government (the Bopreal solution has benefits and costs), it is not understood how this new stock of unpaid debt is not considered the same. You can simulate a first half of the year where the BCRA buys about 9,000/10,000 dollars (very good data) that not coincidentally resembles about US$9,000 million of new unpaid import debt. And, simultaneously, exporters will have (mis)sold some US$8 billion into the gutter of alternative markets.
The small problem with this ingenious scheme is that it is unsustainable. Because when in the second half of the year import payments are equal to imports, 80% of the expo will be less than 100% of the impo. Barring an unlikely net capital inflow, the accumulation of reserves (which are still negative in net terms) will have ended. The IMF has also become active and demands that the blend (preferential export scheme) ends June 30. This is where the questions arise: eliminate the blend Will it mean revaluing the exporter’s nominal exchange rate or will it have to be accompanied with a compensatory “jump”? When exporters no longer sell dollars in the MEP, but rather all to the official, what will happen to the gap?
Given these doubts, where in the long run the macroeconomist will be right, surely the question is when to start. Maybe (just maybe) having chosen this scheme of trader in December it was a good idea. But an overcoming exchange rate agenda that connects is absolutely necessary. And that is not the common phrase to get out of the trap and unify.
We should not make the mistake of persisting in a crawling peg at 2% when the melons are not yet fully accommodated and residual inertial inflation will still be high, even if it drops to one monthly digit. It is not too late but if in March and April the crawl continues at 2% per month, there will begin to be a smell of exchange delay. Facing the exchange rate agenda with an unnecessary exchange rate delay would be the worst starting point.
Macroeconomics demands the elimination of the blend as soon as possible and compensated with a jump that neutralizes the revaluation. He trader knows that it is a risky operation that must be carefully implemented and communicated. Market access for new imports should be accelerated and even released as soon as possible. Today the prices of “importable” products include a risk premium as there is no fluid access to the exchange market.
The alternative exchange rate (MEP/CCL) must still find a level of balance in a market with more logical CNV regulations towards total liberalization. Two regulations will one day have to be eliminated: the one that prohibits access to the MULC to companies that have purchased MEP dollars and the one that makes it difficult to pay for old imports with MEP dollars.
A permanent objective of any overcoming agenda is for the Central Bank to continue accumulating reserves until it balances assets and liabilities in dollars to have zero and then genuinely positive net reserves. Fiscally, it will be necessary to obtain resources (more income and/or less expenses) to compensate for the future reduction and elimination of the PAIS tax, necessary to balance the relative price between exportable and importable goods.
The last step of this exchange process (understood as part of a more comprehensive macroeconomic program) would be that the unification of the exchange rate is only achieved when the value of the MEP dollar converges (down) to a value of the commercial dollar located at levels competitive. For this, it is key that the decline in the MEP/CCL is based on a genuine recovery in confidence in the currency and not on artificial sales by exporters, which in a macroeconomic vision means throwing dollars down the drain.
We have always thought that the liberation and exchange unification should be the “icing on the cake”, the last graduation step once the fundamentals macroeconomics are established. Simultaneously, unnecessary dollarization can be “replaced” with a bimonetary economy where a stable peso “coexists” (before competing) with the dollar to give freedom and security to Argentines who have dollars so that they can put them to work and invest. It is part of the long marathon that has begun.
The author is an economist, president of Macroview