The debate about the exchange rate delay in Argentina has ceased to be a speculation of consultants and has become an unavoidable statistical reality.
According to the latest market data, the Multilateral Real Exchange Rate Index (ITCRM) It is already at levels equivalent to those left by Sergio Massa’s management, characterized at that time by an exchange rate delay, and with a gap greater than 200% between the official and parallel exchange rates.
The novelty poses a immediate challenge for the Central Bank’s “nominal anchor” strategy.
Return to November 2023
The speed of the peso’s appreciation accelerated in recent weeks, simultaneous with the war in the Middle East and the weakness of the dollar globally.
Just as the Argentine peso strengthened, the same thing happened with the currencies of emerging markets, including that of Brazil and the other partners in the region.
The most uncomfortable point of comparison for the economic team is the “Massa Dollar.” At the end of the previous management -in November 2023– the dollar (at today’s prices) was in $1,350.
Yesterday Monday, the wholesale dollar ended at $1,370.
“The real exchange rate is located at historically low levels: 31.5% below the long-term average (excluding the management of Alberto Fernández) and just 1.5% above the inherited level by Massa (average of November 2023)”, highlighted the latest report to clients of the specialized consulting firm PPI.
Less inflation or floor to the dollar?
There is every impression that, in the coming weeks, the Government will have to choose the path to follow: either enable an additional fall in the exchange rate, or put (or at least try) a floor on the price of the greenback.
Massive liquidations are coming from the countryside due to the large harvest, and yesterday the Central Bank reported that this historic offer is also accompanied by a stock of US$3.2 billion from companies that at the time placed Negotiable Obligations abroad and are pending liquidation.
“With an eye on inflation (via lowering prices or a ceiling on increases in tradables), the BCRA could allow an additional drop in the exchange rate, although this would put more pressure on the margins of tradables producers,” wrote Portfolio Personal Inversiones technicians.
However, there is an incentive for the BCRA to buy all the dollars it can in the market.
“From a country risk compression perspective, the most likely increase in the rate of purchase of reserves tips the balance towards an improvement in financial conditions for the sovereign,” the analysts said.
A scenario of historical lows
If you look at the long film, the current photo looks even more striking. He historical average of the ITCRM between 1997 and 2026 (excluding the administration of Alberto Fernández) is located in $1,990 (at today’s prices).
The real exchange rate is now below that average, and is close to the November 2015 lows ($1,220)just before the release of Mauricio Macri’s administration from the stocks.
The upper band today worth $1,660. The wholesale quote is a 17% below of that level.
This appreciation not only affects the official dollar. He CCLwhich used to be the refuge of value par excellence, along with blue, has also been showing a collapse in real terms.
While in October 2020 it reached a peak of $3,983 and in October 2023 it reached $3,823today it crawls around the $1,465.
The crossroads of the BCRA for the dollar
The Central Bank is in a delicate position. On the one hand, the appreciation of the peso acts as a powerful inflationary anchor, allowing the CPI to converge more quickly towards the target of the 2% monthly.
However, the cost can be a loss of external competitiveness which is beginning to be reflected in industrial activity and the loss of formal jobs.
The official strategy seems to be betting that lower taxes (such as the end of the PAIS Tax) and structural reforms will compensate for the loss of exchange competitiveness.
However, recent Argentine history shows that ITCRM levels below $1,300 They are usually difficult to sustain without generating tensions in the balance of payments.
However, there is now a relevant seasonal fact: the “wall” of dollars from the thick crop and the strong trade surplus that Argentina has.
For the Government, a historic era is coming, with the possibility that the great influx of dollars will be maintained over time, not only through the countryside but also through the energy exports. There is a bet that the purchases of reserves will determine a strong reduction in the country’s risk and, in that scenario, dollars will enter from investments in economic projects.
It will be key that this reality, rehearsed by Vice Minister José Luis Daza over the weekend, comes to fruition soon: It is clear that the exchange “cushion” left by Luis Caputo’s devaluation has completely evaporated.
