A brief text circulated among economists and leaders of the Renewal Front, headed by the former Minister of Economy and the former 2023 presidential candidate for the ruling Union for the Homeland Party, Sergio MassaTo confirm The exchange rate policy entered the discount time And the real exchange rate of the official dollar (i.e. taking inflation into account) is already 4% less than the average purchasing power that the official rate of the North American currency had between January and November of last year, before the start. to the current government.
“The Central Bank of the Argentine Republic (BCRA) concluded May with reserve sales, which means the lowest weekly balance of purchases since the beginning of Milei’s administration. At the end of this week, it was forced to intervene in the market to sell $52 million, thus marking the second period of sales in the week,” As stated in the text, which also highlights the $11 million sale at the beginning of the week. Thus, there have already been six days of net selling of dollars by the central bank since Miley took office.
“Over the course of the month, BCRA was able to receive a total of only US$2,522 million, a decrease of 24.6% compared to the previous month. This monthly income is the lowest in the past three months and the second lowest during the President’s administration. Javier MileyFebruary is the only month with lower volume, says the document, one of whose graphs shows, specifically, month-over-month purchases and the monthly average from January to May.
Based on this observation, the document stated: “The exchange rate scheme that was implemented last December with the aim of restoring the central bank’s reserves showed signs of fatigue, affected by various factors.”
The first thing he lists is that the liquidation of the rough crop “was slower than expected, which affected expectations.” Although settlements increased during the weeks of May, the text explains that “these did not reach expected levels,” a fact linked to low interest rates.
“With banks offering loans to the countryside at interest rates of 3% per month or even less, and at a Link crawl (Official Guidelines for a 2% BCRA Dollar Increase, producers would prefer to hold on to their crop, especially in the context of expectations of higher soybean prices in Chicago,” the clip explains.
The second factor to which he attributes “signs of fatigue” is positive: “a healthy recovery in import demand.” In this regard, it indicates that 68% of imports were paid in April, “a slight improvement compared to March 2024 and reaching the highest level since July 2023.”
However, the analysis continues, showing a chart from the economist’s report Salvador Vitellifrom consulting firm F2, “About $1,490 million remained outstanding in April, adding to an unpaid debt of $9,100 million in the first quarter.”
For this reason, he warns, “it is necessary to normalize foreign trade to address this situation.”
In its final part, the document takes stock of what has happened since the devaluation of the currency in December and the plan to access a single and free exchange market for importers, who in the first quarter paid only 41.7% of accumulated imports, achieved savings of US$7,600 million and allowed BCRA to purchase 17,274 Million US dollars.
But he warns that, in the second quarter, “the situation is expected to be more difficult, given the expected recovery in demand for foreign currency for imports and the impact of the lag in the exchange rate, which is currently 4% lower than January.” Average – November 2023.
The analysis concludes that this “could impact the supply of foreign exchange if the government maintains the creeping peg strategy at 2% per month.”
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