Lack of dollars, high inflation and debt payments, the challenges of the economy in the second semester

Argentina will make a voluntary payment to the Paris Club to avoid default and the negotiation deadlines are stretched

The second part of the year has already begun and the Government is preparing to face the test electoral while the economy continues to suffer the effects of the pandemic. This week, the Indec published the activity data for the month of April, which showed a monthly drop of 1.2%. On the debt side, the agreement with the Paris Club anticipates that the new program with the IMF will be delayed until 2022. On the exchange front, the blue dollar overheated in the last days of June and put the House on alert Pink

Analysts assure that there are three challenges that, far from dissipating, will intensify in the remainder of the year. Among them, the main ones will be:

  • The lower income of trade dollars and the growing tension in the parallel market.
  • The inflation persistent.
  • The debt in pesos, for demanding maturities; Y in dollars, due to the absence of news in the negotiations with the IMF.

Less dollars will arrive and more will be spent

The tension in the foreign exchange market, who was absent in the first five months of the year, returned in June. The blue dollar hit highs for the last eight months and returned to the zone of $170. In the bond market, where the Government intervenes with sales by the central bank (BCRA) and the Considered to lower the implicit exchange rate, official participation was renewed. Quotes, especially cash with settlement, They have been looking for several weeks to exceed $ 170 but the sales of public entities prevent it.

The official firepower to control the financial exchange rate is based on the dollars that the BCRA was able to buy during the last months. Is about currencies cleared by exporters of grains, which took advantage of record international prices and made their largest contribution for the first half of the last 18 years. However, as the second semester progresses, thick harvest ends and they tend to enter less field dollars. November, in particular, is usually one of the low months in terms of liquidations.

Analysts warn that these lower liquidations could lead the BCRA a lose a share of the $ 6.4 billion you bought so far in 2021 to try to contain financial quotes of the dollar, that act as references for the blue and that usually increase in the second semester. “Odd (electoral) years usually have a peculiarity: the movements of the dollar ‘counted with liqui’ they tend to be concentrated in the second semester. Analyzing the average of odd years since 2011, 63% of the total movement of the year occurs between July and December“Said GMA Capital.

“One of the challenges that the BCRA faces with this exchange rate policy is to be able to sustain the stability of the gap exchange rate, something that if reversed could end up also affecting the formation of prices. With the accentuation of the rhythm of delay of dollar official, the parallel prices began to gain momentum in the week. In fact, the BCRA intervened again (with smaller amounts) to stabilize the cash with settlement around $ 170, a 76% above the official dollar“LCG added.

Inflation is sailing at 3%

Despite the exchange rate delay indicated by LCG, prices do not stop yielding. Inflation continues to be among the main concerns of the Government and analysts believe that it will remain above 3% per month in the coming months. Although the official data of the consumer price index will be known on Thursday, July 15, the projections of LCG They estimate that it will give 3.4% in June and that it could be slowed forward.

In the first five months of 2021, inflation accumulated 21.5% and from GMA capital they indicated that, if prices follow the path of the Market Expectations Survey in June, inflation would accumulate more than 25% in the first half of the year. “Far from seeing a near relief, the statistics would play against the second semester in a context where there is no solid and credible macro plan and expectations are unmoored. In the election years In the last decade, accumulated inflation between January and June was, on average, 44% of the total added at the end of the year. That is, the The remaining 56% of the price variation was accumulated between July and December”, The firm warned in its weekly report.

The two debt problems

In the international arena, Argentina announced a partial payment to the Paris Club but it has yet to finish resolve the debt with the IMF, which requires a new program. In the Government they prefer to leave that understanding to after the elections because they consider that the body will demand to do some unfriendly macroeconomic adjustments that could weaken the chances of an electoral victory.

If not agreed with the IMF, Argentina will have to continue making payments to that body, which will require a greater amount of dollars. “We estimate in US$12.226 millones maturities of obligations in the second half of 2021, half correspond to sovereign maturities to face capital and interest payments with International Organizations, mainly the IMF for US $ 4,575 million. The issuance of Special Drawing Rights (SDRs) and the reception by Argentina of around US$4400 millones most likely they will be used to pay those maturities without affecting the current level of reserves ”, calculated Quantum Finanzas.

In what has to do with debt in pesos, the second semester will be challenging. Only in July, the Treasury has maturities of almost $ 280,000 million. The economic team will seek to renew them to finance their expenses and, at the same time, to avoid paying and that investors allocate those pesos to buy dollars. “To measure the mountain of commitments to come, these are 1.2 times those faced between January and June, and add up to nearly $ 1.8 trillion”, Compared GMA Capital.

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