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Why is the BCRA in trouble?

Martin Guzman does not hide – neither in public nor in private – his concern about dollar reserves. He is convinced that the accumulation of foreign currency in the Banco Central is the anchor -perhaps the only one- so that the attempt to tame inflation have any chance of success. At least, that is what the minister believes.

May ended with purchases for only $790 million. This is how the monthly balance was left after yesterday’s massive sale Tuesday for a total of $190 million.

To meet the goal signed with the IMF, the Central Bank should buy around US$2.6 billion during June. At a rate of US$130 million per day. A tricky goalif you take into account what happened in recent weeks.

Difficult mission: the BCRA will have to buy US$2.6 billion during June to comply with the IMF.

Soy dollars, not enough?

Beyond the objective with the Monetary Fund, the most relevant thing in the current context is that the Central Bank has not been able to appropriate the cereal liquidationswhich have been growing in relation to what happened a year ago.

In the midst of the accelerated inflationary dynamics and the lack of credibility on the part of the economic agents -all in a context of fierce internal politics in the ruling party-, the accumulation of reserves appears as the only type of anchor that the Government could put to stabilize expectations.

“With a soja a u$s650 it is impossible for there to be an exchange rate crisis,” assures a key economic cabinet official in dialogue with iProfessional.

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However, in the Casa Rosada nervousness reigns over this issue. The calls to Guzmán and Miguel Pesce cross daily to find out in detail what is happening in the stressed foreign exchange market.

According to information to which iProfessional had access, the imports May closed with a historical record. An increase of 50% compared to May last year. If so, they would have climbed to about $7.7 billion. A historical record. The previous one had been in August 2011, with purchases abroad for US$7,616 million.

The high price of soybeans does not seem to be enough to reinforce the reserves of the Central Bank.

The high international price of soybeans does not seem to be enough to reinforce the reserves of the Central Bank.

where do the dollars go

What happened yesterday is a symptom of what is happening: los energy payments They take a good part of the foreign currency that the BCRA acquires from the cereal companies. It’s not all, of course. But the explosion in gas prices has a lot to do with that loss of greenbacks.

A look at the latest official figures account for this phenomenon. During the first four months of the year, energy expenses totaled US$3,583 million, 157% higher than the January-April 2021 period.

implies a jump of US$2,188 million that the Central Bank had to pay as overhead for the gas imports.

The price of LNG, which a year ago cost US$8.33 per million BTU, came to quote around US$34.50. Four times more expensive.

The high cost of energy imports has a strong impact on reserves.

The high cost of energy imports has a strong impact on reserves.

Consumption and investments, behind

In the case of imports of chemical products, rubber, and plastics, during the first four months they totaled US$3,481 million, 26.9% higher than the same period last year.

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imports from trade products grew 35% in the first quarter, for a total of US$2,242 million (versus 1,659 million from January-April 2021), which is partly explained by the expansion of economic activity.

With a 20% increase, foreign purchases of machinery and equipment totaled US$2,099 million (against US$1,758 million in January-April 2021).

The BCRA, in the center of attention

For Guzman-Pescethe lack of currency buying power can give them headaches: In the foreign exchange market, an incipient dollarizing wavewho was absent in the previous weeks.

It is clear: the different actors in the economy are on the alert: they watch with extreme attention the Center movements.

Miguel Pesce, head of the BCRA, under the scrutiny of the market.

Miguel Pesce, head of the BCRA, under the scrutiny of the market.

The official pressure is transferred to the exchange market, where prices are very sensitive to the achievements (or failures) of the monetary authority.

Free dollar prices remain on a tolerable path, but official dispatches began to worry about, as noted above, the dollarization trend. These are investors, but above all companies, that dollarize portfolios but also struggle to enter the foreign exchange market by stocking merchandise in the official foreign exchange market.

The “other” escape

Between cards for purchases abroad and the dollar saving, the BCRA had to deliver US$645 million during April, according to the latest official record. More than four times what it sold in April of last year.

To make matters worse, the foreign tourism that enters the country does not leave foreign currency for the BCRA. With the stocks and a gap of 80%, Brazilians, Uruguayans and Chileans already know that purchases must be made outside the formal channel. Very few pass the card; most travel with tickets, which are exchanged even in the main hotels of the cities visited.

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It is clear that Guzmán and Pesce are being pulled from all sides, and it will not be easy for them to accumulate foreign currency in such an adverse context, either due to the opening of post-pandemic tourism or gas imports.

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