The economist estimated that by the end of the year the BCRA’s net reserves, including gold, will be at an alarming level. What did he say about the dollar
The former president of the Central Bank Martin Redrado warned this Thursday about the fall in the level of reserves and questioned the “high levels of exchange rate gap“, which exceed 100%.
“Either we arrive with the reserves for the April harvest or the agreement with the Fund, or tighten your belts, because the plane is going to move“, Redrado sketched and emphasized that the Government will have to face a “turbulent summer“in relation to the dollar.
He estimated that by the end of the year the BCRA’s net reserves (including gold) will be $ 3.5 billion.
Faced with this scenario, he said that “they will probably begin to accelerate the rate of devaluation.”
And regarding the agreement with the IMF, he considered it unlikely that the agency would accept an exchange gap greater than 100%, recalling that reducing it was a requirement that it included in the latest agreements with Egypt, Nigeria and Angola.
Regarding the possibility of an exchange rate split, he advised against it, warning that it would prevent accumulating reserves, it could trigger financial dollars and complicate indebted companies in the international bond market.
The economist warned that in December all indicators related to the price of the dollar will be at “Red zone“.
And he wondered if the ruling class “realizes the seriousness, or will we come to more complex processes like those that Sourrouille, Lavagna and Cavallo had”, in a talk organized by the ICBC bank.
Redrado anticipates a worrying decline in the level of reserves.
Is a difficult summer coming?
Martín Redrado warned that the Government will have to face a “turbulent summer“with the dollar and urgently address imbalances through an agreement with the IMF, to avoid further deterioration of the economy.
Redrado, who is a source of consultation for Vice President Cristina Kirchner, considered the economic policy “weak”.
In particular, he questioned the restrictions to access the dollar and the gap between exchange rates and the official dollar.
He also warned that “there are fewer and fewer reserves” to sustain the price of the North American currency.
The economist said that since Monday, the central bank “He decided to throw in the towel to artificially maintain an exchange rate gap, which did not generate noise until the elections,” by ceasing to intervene in the financial dollar market, which triggered its price.
He regretted that this intervention “had generated a loss of US $ 25 million per day, and a subsidy between a cash with controlled settlement and a free one.”
Redrado confirmed that its “main difference” is with the exchange policy of the economic team headed by Martin Guzman.
He also estimated that the trade and exchange balance will be around US $ 1 billion a month from now on. And warned that that offer of dollars “is not enough in terms of needs”.
Redrado said that one of the key variables to follow is “the demand for pesos, December is a positive month due to the holidays, but from the middle of January there will be the greatest tension“.
The exchange rate tension could rise from the middle of January.
Regarding the negotiation with the Fund, he estimated that the immediate discussion will be on the exchange and fiscal fronts.
And he predicted “a summer with shocks or some air wells”, in which it will be necessary to “buckle up“.
“The deadline is until March, we can get there scratching the pots and the reaction of the Central on Monday showed that the dollars are not enough, so we see a period of tension in the first quarter that is transferred to the exchange market,” he explained.
He warned that “there are no dollars to radicalize, it can last a month, one can put more controls and there is less and less supply of dollars to face commitments. When they ask me about what the shareholders of the ruling coalition do, I see consensus on not falling into default with the Fund, “he said, although he did not rule out possible arrears in payments.
What will happen to inflation?
About prices, Redrado estimated that the cost of living will be above 50% in 2022.
He recalled that “core inflation has been above 3% for more than a year, and to find that level one would have to go back to the 1980s to find it.”
He said that the transfer to prices “we are already seeing it in the price hike in the first weeks of November.”
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