The BCRA fails to stop the bleeding of reserves. The gross (the assets of the Central, so to speak) are in the worst moment of the president’s management Alberto Fernandez and about to drill the 31 billion dollarswhen on December 10, 2019 it was US$ 43,785.
However, the great currency flight occurred in 2023. This year the gross fell more than 13,300 million dollars from the coffers of the Central.
Thus, net reserves (measuring what is owed in relation to what is held) under the IMF methodology they were in a negative historical red of US$ 2,200 millionthe worst mark since 2004, according to Ecolatina calculations.
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At the end of the soybean 3 dollar period, the monetary entity has three consecutive weeks with net sales in the exchange market and its net reserves are in negative territory for 2,200 million dollars, according to Ecolatina calculations.
This week, despite only having three wheels due to the holidays, parted with US$ 204 million in the MULC and only on Friday he had to sell US$ 125 million.
In this way, it accumulates in the month a total of US$545 million sold in the single and free exchange market, a figure that rises to US$2,673 million so far this year.
“This marks the worst June so far and the most unfavorable cumulative dynamics for years with exchange rate stocks”expressed Santiago Manoukian, Ecolatina’s economic adviser.
In addition to the flight to intervene in the official exchange market, the weak performance of foreign trade contributed to worsen this situation.
The trade deficit reached US$ 2,691 million until May, when the balance was a surplus of US$ 3,208 million in the same period last year, which represents the worst start for the first five months of the year since 2018.
“The deterioration in the balance is mainly explained by the notable drop in exports, 24.8% year-on-year. Although all items contracted, the most important impact is evident in the products affected by the drought: the export of Primary Products decreased 37.2%, while that of Manufactures of agricultural origin 29.0%”, highlighted a report of Invecq.
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In this context of currency loss, the Central Bank is getting a bit of air by using the Chinese swap.
The monetary authority tries to maximize the use of yuan, both in the financial market and in the exchange to gain greater firepower to intervene in the MULC while waiting for support from the Monetary Fund.
Product of the last negotiation with the Asian country, due to the currency swap with China 10 billion dollars could be used.
Because of this, Argentina now has 130 billion yuan that make up the gross reserves and the ruling party is working on the implementation of the “yuan MEP”.
The CNV has already enabled the possibility of settling bonds traded in foreign currency in yuan.
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Now, it would be that the deposit, in cash or in kind, of those who operate in the futures market must ensure that they have equity to respond to eventual losses.
Based on this regulatory change, the idea is that part of what is traded in “MEP dollar” will be traded in “Mep yuan”. In this way, to close the operation there would have to be someone interested in selling a bond in exchange for Chinese currency and, as their counterpart, a player who has yuan to pay for that title.
In this scenario, and pending some advance disbursement, payments to the IMF for this week were postponed until the end of the month, a movement allowed under the Fund’s regulations.
The Government had to cancel maturities with the international organization for US$ 2,700 million, approximately 2,013 SDRs. However, the BCRA currently has just over 1,200 SDRs, just over US$1.6 billion.
“Let us remember that the Government would have failed to meet the goals of International Reserves and primary deficit established for the first quarter. However, everything seems to indicate that the authorities have managed to get the IMF to accept a reformulation of the program under the argument of the impact of the drought. But, both the advance disbursements mentioned in recent weeks and the requirements that the agency could request still remain unknown,” concluded Manoukian.