Forced by the electoral slap, Massa devalued as the Fund requested

2023-08-15 10:28:40

The initial shock of the unexpected victory of Javier Miley In the elections PASOwas mutating with the passing of the hours into a management imperative.
Decisions that had been postponed for a couple of weeks came together suddenly on the morning of the day after the elections, in the midst of a collapse of Argentine papers and given the certainty of a scenario of exchange rate divergence that would cause the fragile stability to collapse. of the Argentine economy.

Indeed, Argentine bonds and shares listed abroad fell around 10% in the early hours of Monday, while just a few hours after the result that crowned the libertarian as the largest voter in 2023 was known, the price of “crypto dollar” (the only one that works 24 hours a day), jumped to $714.
It was the prelude to a day that would be frantic in exchange matters.
It was then that the economic team that leads Sergio Massa decided to go forward at the same time with a devaluation of the official exchange rate,anticipating the move of the parallel exchange segment, and a rise in rates in order to contain the pressure on the demand for foreign currency.
The devaluation of the official exchange rate is one of the main demands made at the last minute by the International Monetary Fund (IMF) prior to the signing of the agreement signed only 15 days ago.

At that time, the minister and at the same time official presidential candidate, Sergio Massa, offered all the resistance he could, knowing the inflationary shock linked to a devaluation of the official exchange rate.
As a pledge of exchange in the negotiation, a careless “fiscal devaluation” was applied, which increased the partial import price of goods and services.
Once Milei’s triumph was consummated on Sunday night, and with the certainty of the jump in the price of the blue the next day, finally, the abrupt devaluation of the peso requested by the Fund crystallized.
With the passing of the hours, the dynamics of the parallel market found factual support in the devaluation of the officer for the $80 jump in the price of the blue dollar.

Even so, the combination of exchange corrections produced at the end of the day a significant reduction of the gap between the official and the parallel. That distance was 128% until the Friday prior to the electoral act, and after the measures announced yesterday, it was located in the 95%.
The will to move in the direction requested by the IMF constitutes a resounding change in economic policy. The determination to abruptly correct the official dollar and in one fell swoop destroys the “crawling peg” strategy.” that for months generated daily micro devaluations, that in an almost imperceptible way they managed to ensure that the official exchange rate did not lag behind the general level of prices.

Forced by circumstances, the economic team chose a double play: anticipate the market on Monday morning and at the same time comply in one fell swoop with one of the strongest demands of the IMF.
It is no coincidence that as soon as the decision to devalue the official dollar was known, the organization made it known that at its meeting next week the board of directors will “approve” the first disbursement for US$7.5 billion, which would arrive at the end of August.
Con negative reserves around the u$s 10,000 millions, having activated the currency swap with China for US$5 billionand requested a special line of credit from Qatar to face the due date at the end of July, the disbursement of this month is too crucial in terms of governance until October.
When in the middle of the day on Monday it was warned that the correction of the official dollar left the “dollar card” around $730, A new “patch.

The Federal Administration of Public Revenues (AFIP) reduced from 25 to 5% lto perception of the Income Tax that is applied on the official dollar price, which left in $659 the “dollar card” paid by those who make purchases and payments abroad for more than u$s 300.
The main question from now on and during the two months remaining until the general elections, is how conditioned the margin of maneuver will be for the economic management of Sergio Massa, and how that conditioning can become decisive in the October elections.
In this sense, the main concern is the transfer to prices that will come sooner rather than later, after the devaluation.
“What (the BCRA) is looking for is clearly to discourage the demand for official dollars, which will have its cost in the gondolas. All the goods and services that can be exported or imported will go up these days, because they are bought with official dollars,” said yesterday the economist Aldo Abram.
Certainly the prognosis began to be verified on the same Monday morning.

$685: The new record set by the parallel exchange rate on the Monday after the elections PASO

208,2%: The effective annual rate that arises from the rise in the reference interest rates announced by the BCRA.

sources of an important first-line automotive in Neuquén, iThey informed this medium thatThe price lists for zero kilometer cars have been adjusted by 20% since yesterday. Likewise, two of the main brands that assemble vehicles in the country announced the freezing unit shipments, to reconfigure the price lists.
It is not necessary to be a specialist to anticipate that a similar trend will take place in the coming weeks in the essential items such as food, drinks, clothing, cleaning or personal hygiene.
In return, and Seeking to avoid the incentive to dollarize portfolios, the monetary authority announced a strong and abrupt rise in interest rates.
It is assumed that in nominal terms it is an incentive for placements in pesos, with effective annual rates of over 200%, and monthly rates of 9.8%.

However, this last piece of data only confirms the blow that the official devaluation will have on the general price level in August. If, in order to be positive in real terms, the reference interest rate needs to rise to 9.8% per month, it implies that inflation above 8% is assumed in the eighth month of the year.
It will be Sergio Massa’s first test after the electoral slap.

An even tighter clamp on financial dollars

Through resolution 971 of the National Securities Commission (CNV) limited to U$S 100.000 face value (about U$S 40,000 effective dollars) weekly transactions through sovereign bonds for each account.
“It is an amount much higher than the average ticket of the operations MEP carried out by thousands of people daily,” said the CNV.
In this way, the government intends to facilitate the intervention on this market in order to avoid strong oscillations.
The agency held that it “seeks to reduce the volatility of the financial market and its impact on the normal functioning of the economy, Accompany efforts to avoid imbalances in financial dollars and discourage speculative movements”
during the day mondaythe MEP rose 14% to $621 Meanwhile he Cash with Settlement advanced 8.5% to $655.