The MEP dollar and the cash with settlement (CCL) are cheap in historical terms and adjusted for inflation. This, explain analysts, can be “unhealthy” and lead to a possible run against the peso from January, when the soybean dollar runs outespecially if external conditions weaken.
“Cash with liqui is cheap because the Central Bank has more dollars for the liquidation of soybeans and the pesos it has to issue to buy them is sterilizing them. As there are fewer pesos and more dollars, the cash with liquid calms down“, explains Javier Casabal, fixed income strategist at Adcap Grupo Financiero.
But that the CCL is cheap “is not healthy”, according to Casabal, because “the risk returns when the soybean dollar runs out and the BCRA sells (currency). Or when, due to the drought, the expectation of the liquidation of dollars in the future falls,” he warns.
For Mariano Sardáns, from FDI Gerenciadora de Patrimonios, “the situation is that of the end of the government of Raúl Alfonsín, with a high level of activity and a lot of consumption because everyone wants to take the weights off“.
“Then, At some point, importers will start to agree to buy cash dollars with liquidation and open an account abroad to pay the Chinese supplier. So you have product to sell to that market that takes pesos off“, he stresses.
Are the MEP dollar and the cash with liquidation cheap?
The value of MEP dollar or cash with settlement is very low in historical terms and adjusted for inflationaffirms Casabal.
The expert specifies that “the parallel was worth $340 during the last stress due to the departure of Silvina Batakis from the Ministry of Economy. With 6% inflation, that would have to add up to roughly $18 every 30 daysthe dollar should not be at $300 today.”
“The adjusted for inflation today would be at $425 if those conditions were maintained, and with a calm market and falling deficit, could not be less than $370“, he considers. For this reason, he maintains that financial dollars “today are very cheap.”
The parallel dollar, in historical terms and adjusted for inflation, should be between $370 and $425
This also happens, considers Casabal, because “the government also intervenes through some public agencyand with few pesos, selling bonds, controls prices and keeps cash at bay with liquidity”.
Dollar: exchange rate fragility and conditions for a jump
Casabal believes that the fact that Whether the dollar shoots up or not will probably depend on an “external trigger”, such as more instability in Brazil or expectations of the Fed raising rates above 5%, because the dollar would strengthen again with all currencies and in that case , or you devalue or you run out of dollars“, emphasizes.
“There is a fundamental level of fragility, because there are many pesos on the street and although the Central Bank withdraws many, they are not all. Now there are more dollars for soybeans, but in In January there will be fewer dollars, since those that were anticipated now are not there, and this may end up causing the exchange rate to jump. In any case, the trigger is missing, which may not be local, but come from abroad,” he insists.
“In practice, today importers do not go in cash with liquidity to get dollars to pay abroad; what I am seeing are delays in import approvals and that control is accentuating. The last trade balance showed u $s6,000 million of imports in the month, which is the level that the Government considers most acceptable, but which leaves u$s2,000 of purchases blocked and kicked off later“, describe.
“This is a source of another instability because, if importers perceive that they are approved of payments in no way, at some point they are going to overturn cash with liqui to pay for purchases and get products. And the day that passes, it’s a disaster, because they are completely different volumes, “he warns.
“The official exchange market (MULC) moves around US$1,000 million daily, while the cash with liquid has less than US$100 million. If importers change windows, there is no ceiling, although I do not see it as likely, because the price of the dollar would double“he points.
What fears does politics generate for 2024?
Casabal maintains that, although the lack of continuity that is expected from the political point of view scares the market about the possibility of a breach like the one imposed by Mauricio Macri on futures contracts in 2015, the data on what will happen in 2024 with the change of government ends up being “irrelevant”“.
The data on the next elections may be irrelevant if the market is ahead
“We are going to have the problem sooner, in any case. In political terms, Cristina Kirchner nominated Alberto Fernández as presidential candidate in May 2019, and there is a long way to go by May 2023,” he says.
“The market does not wait for May and tries to protect itself before. The market is moving, it is worried, it goes out to protect itself, it becomes very short, with fixed terms of one month, seven days and less. The thermometer is the public debt tenders: the Treasury issues in March 2023, not in December, and much less in 2024“, considers.
“The Government is going to need US$1 billion in financing every month, of which half get it in the same public sector. This means getting the market to lend US$500 million every month. We are testing and there is always a little bit left. In November it was zero; you rolled everything, but nothing more, “he recounts.
“It is true that the Central Bank intervenes, buying CER-adjusted Treasury bonds, but things look very fragile,” he emphasizes, specifying that the bonds TX24 that the BCRA buys has a rate of 11.5% or 12%, but in the TX26, where the monetary authority does not intervene, it goes to 15% or up to 16% plus CER.
“The BCRA regularly buys CER Bonds in the market including maturing in 2024 (TX24) and the long part of the curve (from 2026), where it does not carry out interventions, is currently trading with higher yields than those we saw in the June/July run“, clarifies Héctor Gagliardi, stock trader of First Capital Group.
“CER instruments are the main source of government financing, and since June the BCRA has been intervening in Sovereign Bonds Adjusted by CER and Lecers,” he warns, adding that in this way it manages to reduce the interest rate it has to pay for them and finance at a cheaper rate.
“If it weren’t for the Central Bank and the interventions it carries out, we would now be in the same scenario or worse than in the June crisis, and the Government would have completely lost private financing,” he remarks.
Regarding the purchase of BCRA dollars in the new scheme of soybean dollar, investors discard dollar linked instruments as hedge facing a devaluation jump since the government continues to implement exchange unfolding.
Sovereign bonds in dollars and negotiable obligations in dollars from private companies are the most demanded instruments at this time, where investors seek to accompany a rise in the MEP exchange rate.
Casabal remarks that it would support the market if Cristina Kirchner nominates the current Economy Minister, Sergio Massa, for the presidency, and that the official sits down to agree on continuity policies with the candidate of Together for Change Horacio Rodríguez Larreta and who would be his Minister of Economy, Hernán Lacunza, who assured that he would not apply a ban on bonds in pesos.