Wednesday, January 26

Despite the trade surplus and SDRs, 2021 closes without accumulation of reserves

Until November, the trade surplus accumulated in 2021 US $ 14,352 million, according to data from the INDEC measured based on Customs records. Both the consulting firms and the Government expect the year to end above US $ 15,000 million. Despite the growth in imports in line with the recovery of economic activity, the boom in commodity prices and the improvement in the quantities exported allowed a positive balance growth of 25% year-on-year. Added to that were the SDRs sent by the IMF, equivalent to about $ 4.35 billion.

Together with the stocks, those around US $ 20,000 million were those that enabled the economic team to sustain the exchange rate anchor strategy to try to contain the advance of inflation amid strong pressure from other channels. Why did this inflow of foreign exchange not materialize in reserves? The formation of foreign assets (the so-called capital flight) and the tourism deficit, two traditional ways of draining dollars, did not have a major impact this time: in the first case, due to the tightening of exchange controls and, in the second, due to the impact of the pandemic on trips abroad.

As of October, according to the latest BCRA data, US $ 247 million had escaped (against US $ 3 billion for all of 2020 and, deregulation through, US $ 27 billion for 2018 and 2019). For tourism, between January and October there were $ 1,748 million, an important sum but much lower than usual (in all of 2019 the tourist red was $ 5,681 million, even despite the crisis). Although the growing trend in recent months, led the BCRA to prohibit the financing of trips abroad with fixed installments in pesos, which constituted a kind of risky subsidy in the face of a challenging summer.

Then? The main way out were the payments of external debt both from the State and from the companies. This year, capital and interest maturities with the IMF drained close to US $ 5.2 billion, which the Government decided to comply with while the negotiation was extended as a sign of a commitment to agreement despite the shortage of foreign exchange. A good part of them was canceled with the SDR of the Fund itself, the current remainder of which is enough to cover the bulk of the January maturity for a little more than US $ 700 million but not 100%.

Within sovereign debt, the rest was less relevant. Following the 2020 restructuring, this year bondholders were paid just $ 154 million in interest. And the “time bridge” agreed with him Paris club Until March, in 2021, little more than US $ 200 million were paid. With the other multilateral organizations, the official expectation is that the year ends with a positive net flow.

Another important source of foreign currency bleeding was the net cancellations of foreign debt by companies, which during the Government of Let’s change they got into the process of borrowing in dollars. Only by net amortizations of the private sector were US $ 3,988 million between January and October. Interest is added to that. This volume would have been even higher had it not been for the private debt restructurings promoted by the BCRA Starting in September 2020, when it decided that companies could only access the official dollar to cancel 40% of capital financial maturities that exceeded US $ 1 million. With a growing gap, companies sought to take full advantage of access to the wholesale dollar and pay off liabilities without refinancing them.

Of the rest of the foreign exchange outflow channels, one of the most relevant was the intervention carried out by the Central in the bond market to contain the rise in cash with settlement (CCL) operated under the AL30 title. According to private calculations, this involved dumping just over $ 2 billion. After the legislative elections, the entity that presides Miguel Pesce stopped intervening in the gap, something that the IMF demanded of the economic team.

Reserves and IMF

It is precisely the reserves that are one of the key points in the negotiation with the body headed by Kristalina Georgieva. As this newspaper reported weeks ago, one of Washington’s great obsessions is that the country quickly rebuild its stock of reserves with a view to guaranteeing future repayment of the US $ 45,000 million that the Government today seeks to refinance.

Thus, the Fund staff seeks to put a stop to the rate of recovery of economic activity, which this year will be around 10% and will return GDP to the pre-pandemic but post-crisis level of Cambiemos. As marked by Argentina’s structural external restriction, for each point of growth in activity, imported quantities tend to expand by about 3 points. Martín Guzmán had proposed for 2022 in his Budget project that a 4% growth was not approved. The IMF objects to that number and seeks to make it lower, also in line with its claim for a more accelerated fiscal adjustment.

In return, the audit of the loans to Macri reflected that the Fund will validate the continuity of part of the capital and exchange controls, also with an eye on reserves and preventing its disbursements from leaking again, as it admitted happened in 2018 and 2019.

However, the Economic Cabinet is also closely monitoring the shortage of reserves. He knows that it will be a challenging summer on the foreign exchange front due to seasonal factors and due to the coming debt maturities. But, while the rate of depreciation accelerates, it rules out a devaluation jump outright.