People can save in “banknotes” dollars in several ways: in “solidarity” dollars (almost nothing), in MEP dollars (within the country), in CCL dollars (outside the country), or in blue dollars. You can also acquire “quasi-dollars”, that is, goods or assets that are expected to follow quite a evolution of the dollar, such as bonds, assuming credit risks, cars, appliances and some real estate.
At the moment, a great rise in people’s savings is taking place, since their income has long exceeded their expenses. The counterpart of the tremendous increase in the fiscal deficit, due to a pandemic plus quarantine, is money that people receive, which basically saves them in banknotes and bank deposits.
But since he does not want so many deposits in pesos, he seeks in part to buy dollars, and raises his price. This is already happening. Taking the “prepademy” value (end of February) so far (end of July), total monetary assets in pesos, the so-called M3 (currency plus deposits) grew 44%. Almost identical to the most wanted dollar (CCL), which did so by 46%.
We are waiting for M3 to grow 27%, between August and September of this year. If this continued, as a simple rule of three, the CCL dollar, these days around $ 118, would rise to a value of $ 150 at the end of the year.
The problem is that if the official dollar rises to $ 88 in December (last BCRA REM survey), the gap would be 70%. And if the official rises to $ 81 (current political continuity), the gap would be 85%.
Such high gaps generate severe distortions. The incentive to accelerate and overbill imports is very high. Also that of under-invoicing exports (in a time of high gaps, Paraguay exported more soy than it produced). Anticipating a devaluation of the official, all imported merchandise begins to be valued not at the official dollar, but at a kind of “heavenly” dollar (official part, free part). We have even seen misguided circulars from the BCRA, which led to value imports for the CCL dollar.
Such high gaps would be incompatible with Martín Guzmán’s “mantra”: “we want to reassure the economy”.
The government can (and should) do things to make the gap narrow.
A non-exhaustive list would be:
a) End at once with the “debt swap novel”, and clear this front. It would be easier from then on for companies, provinces, and individuals to want to enter dollars (loans or capital), for a variety of uses (new projects and increased working capital).
b) Reform the exchange system. It is intricate, distorting, and subject to a very high degree of arbitrariness. It has reached the height of banning import dollars to companies that had acquired legal dollars (CCL) to pay debts. That is to say, not only did they have to put more pesos to pay their debts, buying CCL since the officer could not get the dollars, but they were penalized for it, making them more expensive to import. Thus, on the other hand, the same imported good could have different prices depending on the financial position of the importing company. Foolishness.
On the other hand, with this arbitrary exchange system, it would be very difficult for dollars to enter that would otherwise enter. A simple possibility would be to establish a “commercial” dollar for exports and imports (without “stepping on them”), and a “financial” one for everything else (hoarding, debt repayment, loans, capital contributions and also tourism) .
c) Clearly transmit to the saver that the interest rate will win the dollar. On the one hand, today we have a rather silly situation, where the BCRA pays 38% for Leliq, and the saver only receives 30%. Given that all rates are regulated, what if at least the Leliq rate dropped (say 35%), and the deposit rate increased (say 34%)?
d) Even so, without a stock of intervention in the financial market (or that of the MEP or CCL dollar), there would always be possibilities of some undesirable shot of the dollar. So that the interest rate is not too low, the BCRA should be able to sell dollars in the free market. Now that the Chinese swap has been renewed, and assuming an agreement with the IMF will be made, a good amount of dollars (10 billion?) Should be available for this purpose.
e) We are left with the problem of the official dollar. It will be difficult for the CCL not to go towards $ 150 (because of the mountain of pesos that will continue to rise). Much more difficult to stay still or go down. A “reasonable” gap of 25%, with the CCL dollar around $ 125 as of December (say, for example, if it were to drop to $ 110 if debt is settled soon, and rise to $ 125 in December), would imply adding at the current crawling peg, on the order of 2.5% per month, a “max devaluation” of 20%. That is, reaching December with a “commercial” dollar of $ 100 and a “financial” dollar of $ 125, both managed.
Of course, there will have to be a good plan (sorry, “strategy”), which, among other things, will allow ending so much monetary expansion. Having adequate fiscal, monetary and exchange strategies is the ABC of economic policy.
Within this framework, the Government may take 60 reactivating measures with a federal sense, or 100 if it prefers. But if that framework is not in place, the sectoral and partial measures would be degraded, and they will surely not even be able to be deployed. So: what will happen to the peso (or the dollar in Argentina)? Alberto Fernández, for the moment, has the floor.
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