During the past week the Central Bank burned 1,110 million dollars to contain the escalation of the exchange rate, which had drilled the upper band in all its variants. Despite the intervention, the values closed above $ 1,500, with the wholesaler just at $ 1,480 and the country risk by touching the 1,500 points. In that climate of anxiety, and without confirmation of the bilateral with the United States, the presidential trip to the UN General Assembly was postponed until the last moment.
On Monday 22, hours before leaving, a decree was announced that exempts all grain exports until October 31, or even completed a quota of 7,000 million dollars. Already in New York, the bilateral with Donald Trump was confirmed on the march. There the US president surprised to affirm that “Argentina does not need a rescue”, although he later delegated to his secretary of the Treasury the details of a package of measures. The next day three alternatives were communicated: a coin swap with the Federal Reserve for 20,000 million dollars in replacement of the agreement with China; A direct loan of the exchange stability fund – ultrasound for the last time in 1995 with Mexico after the “Tequila Effect” – and the purchase of Argentine bonds by the American treasure under still not specified conditions.
The initial expectation led to a decrease in all exchange rates and country risk, which fell to 840 points. However, the lack of details and criticisms both in Argentina and in the United States – from distrustful republican legislators to agricultural producers who refused to support foreign competitors – diluted the effect. On Friday 26, with new exchange restrictions that prohibited cross operations between the official market and the stock market for 90 days, the dollar shot between 60 and 70 pesos in a single day and the country risk exceeded 1,050 points.
The measure of zero withholdings also exhausted ahead of time: on Wednesday night it was reported that the quota of 7,000 million had been covered, although a good part of the statements came from colleagues without physical grains, except for a Chinese capitals firm that acted quickly and contributed 16% of the total. This raises a judicial risk: producers could sue the President, the Chief of Cabinet, the Minister of Economy and the head of the BCRA for breach of the law that requires effective grain possession at the time of declaring exports. If it thrives, the BCRA should return funds already admitted, in a context in which Washington warned that it will not accept to reinstate the benefit.
In the short term, the only viable component of the package is the swap, since it does not imply indebtedness and is negotiated directly between the Federal Reserve and the BCRA. The other instruments require legislative guarantee, since article 75 of the Constitution gives Congress the power to authorize indebtedness. The rest of the definitions was suspended until October 27, conditioned that the ruling manages to impose itself in the legislative elections.
By Fabián Medina, economic and tax analyst
