Argentine

Achieved the goal of the second version of the “soy dollar 2”, Sergio Massa accelerate negotiations with the next economic authorities of Brazil for strengthen the reserves of the Central Bank.

The technical teams of both countries are working to reach an agreement on the launch of “UP“, the common currency of the two countries, which will serve to finance foreign trade between Brazil and Argentina.

Massa’s goal is for the launch to happen later January 24thwhen Ignatius Lula da Silva -who will take office as President this Sunday in Brasilia- travels to Buenos Aires to participate in the CELAC (Community of Latin American and Caribbean States) summit.

The agreement that Massa seeks had already been addressed in the recent visit that the Argentine minister made to the neighboring country together with his diplomatic advisor Gustavo Martínez Pandiani and Marco Lavagna, head of INDEC.

The proposal was presented to fernando haddadfuture finance minister of the next Lula government, yes Gerald Alckmin, future Vice President and Minister of Industry and Commerce. Alckim will have the strategic under his orbit development bank (BND), entity that will finance part of the Néstor Kirchner gas pipeline.

The Importance of the “South” (To Say Goodbye to the Dollar)

A member of the economics team explains to iProfessional that the idea is that the new currency -South- serves a avoid using dollars in trade between the two countries.

“It will be a common currency, not a single currency, as each country will keep its own currency (the peso and the real). It will have the sole objective of saving foreign currency. Instead of using dollars, common currency would be used“says the official.

Argentina has imports of about 13,000 million dollars a year. The goal is to use the new currency instead of foreign currency, which is what is in short supply at the BCRA. The trade deficit this year would be between $2.4 and $2.5 billion. Indeed, the trade surplus – small, by the way, just 57 million US dollars – reappeared last October.

Technicians from both administrations are working on how to implement the mechanism. From Massa’s team they assure that it would be “rapid instrumentation” in both countries, since “it is not a free circulation currency but it will be exclusively for foreign trade“.

In the economic team, they underline the relevance that Alckim himself gave to the initiative. Either way, it is clear that the implementation of the common currency will ultimately depend on a political decision by Lula. “The future Brazilian president is very interested in this rapid progress,” they say at the Palacio de Hacienda.

IMF Dollars: Will Brazil Help With SDRs?

Weeks ago it emerged that Massa would try to get the 8.5 billion SDRs that Brazil received last year from the IMF, when the organization was capitalized.

That transaction allowed Argentina to receive $4.3 billion, but Martín Guzmán used that money to pay a deadline with the Monetary Fund, as the deal with the organization had not yet closed.

The possibility of accessing the DSPs of Brazil, further away.

Now, Economy puts cold cloths on that possibility. At least that’s a quick definition, as are Argentina’s needs to demonstrate that BCRA reserves are strengthening (or, at least, not decreasing).

The case of the relationship with is different China. In mid-November, during the presidential summit held with Xi Jinping, Alberto Fernández agreed to extend the exchange to 5 billion dollars to be used in trade between the two countries.

Thus, another $500 million has already been activated on top of the $500 million already used. These are yuan found in the reserves of the BCRA and which Argentina uses to meet the trade deficit with China. In this way he avoids using scarce dollars and pays China with the same yuan that that country lends us.

Soybean dollar: will there be a third edition?

For now, the provision that has given Massa the most has been the “soy dollar“, the agreement with the producers and grain companies to allow them a price of $ 200 (in the first version) and $ 230 (in the second).

The second part met its goal Thursday, when it passed the settlement of the $3,000 million pledged by the grain companies. The Central Bank – which yesterday recorded a net purchase balance of 539 million dollars – pocketed 1,853 million dollars in the month of December.

There’s still one coming today, Friday, the final round of the year, though the BCRA will keep filing open for two additional rounds in early January.

Massa continues to look for sources to add dollars to BCRA’s reserves.

the economy holds silence on the possibility of a third edition -a special dollar for the field- but in the market they hope that, inevitably, a new version will be prepared in the early 2023, beyond the fact that Massa looks for dollars in different ways. It is more than clear which is the more effective alternative.

The scenario looks complicated. The drought affects agricultural production and, for this reason, Massa focuses on finding alternatives.

The minister categorically rejected the possibility of a devaluation. He took that decision as a real “state policy”. Will he be able to keep his promise in a very complicated scenario, in case it doesn’t rain in the production area?