The exchange rate conundrum: how the value of the dollar will evolve

It depends. It is the answer that economists in chorus relativize when asked what many economic actors and ordinary citizens want to know if the value of the dollar is “cheap” or “expensive””. Consultations that became urgent in the escalation of demand for the North American bill that followed the bad news that INDEC communicated on Friday, April 14: the rise in the CPI for March had been 7.7%, much more than the average of the estimates of the consultants, which bordered on 7%.

mea culpa

After rehearsing a series of inconsistent explanations (the impact of the war, the “extremely strong” post-pandemic growth or even the drought) due to their unconnectedness and with no other foundation than the need for a causality that would exculpate the economic team from its malpractice, the Government admitted to be facing a pending issue. What followed was, during the following week, new evidence of the abysmal drop in exportable balances due to the drought effect and the worsening of the foreign exchange shortage since the lever of the agricultural dollar collided with bureaucratic intricacies or something much more unappealable: the non-existence of products to liquidate.

The solution at hand also seemed to follow the sequence that Marina dal Poggetto used in its projections of economic scenarios for this year back in January in the News cover story: “the rabbits in the galley” that the economic team brought out to kick forward the unsympathetic or politically unfeasible solutions for the delicate internal balance of the ruling coalition.

The combination of an inflation that has 7 points, of the floor and not of the ceiling, and the acute shortage of dollars led to the declaration of an economic emergency, but also a political one. For the C&T consultancy, the estimate for April was 7.6%, consolidating the upward trend. sergio masa resorted to a well-known remedy and another more novel, but also more difficult to sustain over time to curb the demand for dollars.

On the one hand, to sharpen the clamp on imports (this time, to the payment of contracted services) and on the other, to propose financial control measures to avoid deflating the demand for “financial” dollars that better measured the vitality of the market than the blue. .

dollar shortage

Thus, they managed to drop almost 5% of the price, but they caused a new gap with the blue: of the dollars stock market (MEP) and cash with settlement (CCL) that traded almost 9% below the marginal. Such a reformatting of the foreign exchange market that exposes the imbalance in which it has been since the summer of 2020 and that, as the latest weekly report from his consulting firm EcoGo says, it only serves to gain time. Its inflation estimate for April gives 7.3% and 108% the interannual rate.

SOS Lula

ricardo delgadoPresident of Analytics, observes that there is only one force that revolutionizes the market: the lack of dollars. Therefore, it will be “unbalanced, in permanent tension” putting the “hold on” plan in check. “It depends on how many dollars are replenished in the Central’s treasury by resorting to the recipe of more stocks, yuan, reais and the Fund,” he emphasizes.

Photogallery Brazilian President Luiz Inácio Lula da Silva greets Argentine President Alberto Fernández at the Alvorada Palace in Brasilia

The solution adopted by the Government this time involved getting two of the origins of Argentine imports (China and Brazil) to accept the use of their own currencies that are stored in the Central Bank after the respective exchange of currencies, to pay for purchases. inputs that are made in those places. Of course, since the announcements made last year and its operation another gap appearedvery expensive for Peronism: the difference between “promising and realizing” in the words of Perón himself.

These outflows, although they alleviate the pressure on the dollar (to use it in the rest of the markets), continue to depend on other sources of institutional provision of foreign currency (CAF, the World Bank and, eventually, some advance of remittances from the IMF ), difficult to obtain, but equally insufficient to alleviate the decrease of US$22,000 million in exports. In addition, it kicks the debt generated for the next administration, another registered trademark of the attempts to contain the deluge without devaluing, a taboo for the K sector that made the exchange rate delay (and also the rate) a valid tool for the distribution of income in a stagnant economy.

green bet

With this scenario, it is not uncommon for expectations of a sharp correction in the official exchange rate to rise. However, the electoral context forces this automatic correction mechanism to be extended until STEP (in August). Parachute roman alfredoowner of roman group and director of the Business Economics career of the Austral UniversityHe points out that there is very significant inflation in dollars due to the systematic delay of the official dollar.


“Seeing inflation accelerating at a rate of 8% per month and entering the finalization stage due to the August elections, it is likely that we will see higher inflation in dollars in the coming months,” he argues. He attributes this to the decision not to speed up the devaluation of the official exchange rate at the rate of inflationwho keeps winning the race.

Romano understands that a growing dollarization of portfolios is the common denominator in times of presidential elections in Argentina. “This year, and especially in this second quarter, is compounded by a lousy harvest that limits the entry of foreign currency and put more pressure on financial dollars; Faced with which we see that the Government tries the impossible to contain them ”, to underline.

He is not the only one who surrenders to evidence: “The dollar is the Achilles heel of all Argentine governments and that is why the Economy will do the impossible to contain not only the official dollar, preventing a large devaluation at levels of 100%, but also the rises of the financial parallels”, he anticipates.

Put up with

The tactic to be able to get to the August elections with some oxygen, at this point in the calendar, involves the temptation of a devaluation. The instruments available to you are not many and their effectiveness is not absolute. To the aforementioned of obtaining extra financing from the Fund, it could be exhausted in an accounting movement but not in fresh money to sustain imports.

inflation in argentina

At the end of June another term will expire for the quarterly review of reserve accumulation and fiscal goals, each time more difficult for the Government to approve if a pardon like the one obtained for the first quarter of the year. Financing from other official bodies is already exhausted and the result of the tenders for the 5G band, could bring a maximum of US$1.5 billion, but with a timing that does not match the urgency of the box. And finally, the overwhelmed local financial market is showing signs of stress and it is becoming more difficult to achieve the expected US$5 billion without triggering a super-tax policy, placing 20% ​​of that objective as the most likely to be achieved. Until now, interest rates have lagged behind inflation for fear of paralyzing economic activity.

The key question is no longer if there will be that devaluation jump, but when and how it will be. Romano does not see it as likely until STEP, but depending on the result, there could be a correction of the official dollar and thus give more volatility to the rest of the financial dollars. Or what in terms of Marina dal Poggetto, the setting in which “no rabbits” in Sergio Massa’s gallery when he was super minister, it is becoming a reality. And in a broader look, it becomes a sign of the “great collective economic failure with few winners” of the 40 years of democratic restoration.

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