As is customary, and as we anticipated last week regarding the bilateral meeting with the president of the United States – which ended up being non-existent and with rudeness included – the meeting that was scheduled for Tuesday the 14th at 12 noon in the Oval Room was postponed to 2:00 p.m. and ended up taking place informally in the Lincoln Room of the White House, at 2:15 p.m. The conversation, focused on management issues, lasted just 50 minutes. Usually, leaders are received in the Oval Office privately and with a photo—as happened with Alberto Fernández and Joe Biden—and then move on to a working lunch of about two hours.
The US government, meanwhile, continued its interventions in the Argentine exchange market until Friday, October 17, through well-known banks—Santander, Citi and JP Morgan—for a total of approximately USD 1.3 billion, according to the records of the Free Exchange Market, which normally operates about USD 450 million daily.
The underlying problem, according to market agents after the frustrated bilateral, is that President Donald Trump himself made it clear that the financial bailout is conditional on La Libertad Avanza winning the midterm elections – as expressed in his post on the social network X. If not, the United States would stop applying these policies, “because they don’t like to waste time or reserves.” There was also no subsequent announcement at the press conference: the Argentine delegation was placed with its back to the journalists and Trump spoke for 45 of the 50 minutes about the peace agreement in the Gaza Strip.
The posts of the Argentine Minister of Economy, Scott Bessent, who acts as a mere intermediary in some aspects, are becoming more frequent. But, given their increasing frequency, the messages no longer have an effect on market operators. On Friday the 17th, despite the USD 280 million injected by the North American Treasury, all dollar quotes rose between $50 and $60, and the country risk rose from 1,029 to 1,089 points. The message was clear: they no longer believe either the Argentine or the American government.
The reaction was accentuated after it became known that the United States modified the instruments of intervention due to strong internal criticism since September 23. In short: they post more and more and the effects last less.
The week closed with a loss of BCRA reserves of USD 888 million (-2.11%), an increase of 7% in the MEP and CCL financial dollars, and 4.5% in crypto assets, all exceeding the upper band agreed with the IMF. The wholesale dollar ended at $1,455, the retail dollar at $1,475 and the blue at $1,485. The logic is simple: who would sell dollars knowing that, in fifteen days, according to what Kristalina Georgieva said on October 9 and 18, the Argentine government is obliged to devalue close to 50%?
Meanwhile, the Ministry of Finance only managed to renew bills in pesos for 45% of the total, with a rate of 8% for 60 days, releasing $2.1 trillion—almost USD 1.5 billion—to the market. In short, “Uncle Scotty’s wallet is being emptied,” and everything that is issued in pesos ends up converted into dollars, as Secretary of Economy Caputo recommended on July 2: “It’s cheap, don’t miss it, champion: buy”.
The week that begins this Monday the 20th promises to be even tougher. As I anticipated on October 1 in different media, the exchange rate between October 15 and 20 would once again be between $1,500 and $1,600 in its wholesale and retail variants, with the usual transfer to prices and inflation. It was demonstrated that the “disinflation” story was broken: it is the fourth consecutive month of increase, and the decrease is only nominal. Since January 2018 we have been living in hyperinflation, a product of the gap between prices, salaries and purchasing power. I prefer to speak to you in simple words rather than with technical terminology, as Jauretche said in The Argentine zonceras.
Fabian Medina
Economic and tax analyst
