PLAN M | ECONOMY | Key: Do you reach the dollars in the Central Bank to reach December 10 without more drastic measures and without IMF help?

Central Bank reserves are an increasingly scarce and precious asset. They currently have multiple uses and destinations. They serve to be able to intervene in the exchange market, to pay the short-term debt of the National Treasury (Letes in dollars) – which was not reperfiled. And they serve to cover the maturities of sovereign bonds in foreign currency. But also, within the gross reserves are the bank reserve requirements for foreign currency deposits in the banking system, which after the STEP election have been falling systematically. The dollar deposits in the banks fell from US $ 32,503 million on Friday prior to the PASO to US $ 22,683 million (last official data available), a drop of more than 30% of deposits in just 1 month. It is an average of withdrawal of deposits of US $ 446 million per day, although that outflow of dollars from the system slowed sharply in recent days, especially between August 9 and 11, with an average withdrawal of the order of US $ S 200 million. (From the peak of 1,106 million on Friday, August 30, there were 406 million on Friday, September 6, following the stocks; 265 million on September 9, 154 million on 10/09 and 181 million on 11/11, latest data available) .

Bank reserves in dollars at the Central Bank are the guarantee of the "immediate" return of deposits in dollars. Those dollars "saved" by the banks in the Central were 16,000 million (almost 50% of the deposits) before the STEP and today there are US $ 7,950 million. When the dollar deposits come out of the banks, the "gross reserves" of the BCRA also fall. Therefore, it is key to stop the bleeding of dollar deposits. If this is not achieved, banks should expedite the repayment of the credits in dollars granted to exporters – which they are already making – to return deposits, but there would be a dangerous area of ​​"immediate" availability of dollars for savers .

In order to cover the first 2 objectives: 1) intervene in the exchange market and 2) pay off the debt that was not outlined in Letes and sovereign bonds using net (or available) reserves. And the dollars borrowed by the IMF and deposited in the BCRA (US $ 7.2 billion) could be used to "strengthen reserves" (in theory "untouchables"), with prior authorization from the agency.

According to our calculation, if we discount the gross reserves of the Central Bank; The currency swap with China, foreign currency deposits – bank deposits -, other loans with International Banks and Special Drawing Rights (SDRs), the BCRA today has just over US $ 13.2 billion. But as said there are also the US $ 7.216 million of the IMF for the "strengthening of reserves", supposedly "untouchables", but a political negotiation with Washington. Between both concepts they add US $ 20,432 million dollars.

Let's now look at the demand for dollars that the Central Bank will have in the coming months:

– Only by National Treasury Bills (LETES) in dollars until the end of the year there are maturities of 6,308 million dollars “in the hands” of the private sector. Of which 90% of the holders are natural persons. Therefore, they do not enter into the "reperfilation" of Treasury Bills. And the other 10% in the hands of companies will be paid 15% at maturity, 25% at 3 months and 60% at 6 months.

– In summary: there are US $ 5.677 million that have individuals and will have to pay with the reserves because they do not enter the "reperfilamiento". And another 15% of the rest, in the hands of companies, which must also be paid with reserves (approximately 95 million dollars) in the short term.

– In the first days of the “new exchange rate” the intervention of the Central in the exchange market was not interrupted. Despite strong exchange restrictions, there were foreign exchange sales with a daily average of US $ 53 million. Therefore, if this rhythm of sales of dollars from the BCRA post cepo is maintained, US $ 265 million per week would be required to keep the dollar "calm". Unless the restrictions are reinforced, that would give about US $ 1,060 million per month. Until December 10, assuming that the same rate of sales of the Central is always maintained, more than US $ 3,180 million would be necessary.

– According to the Orlando Ferreres consultant, there are maturities of sovereign bonds (such as the coupon of the BONAR 2024 in November) until the end of the year for US $ 5,613 million.

– If we add these three items: Foreign exchange intervention (US $ 3,180 million), maturities of unprofilated Letes (US $ 5,750 million) and maturities of sovereign bonds (US $ 5,613 million) the total dollar demand would amount to U $ S 14,543 million, more than the Central's net reserves.

Finally, regarding foreign currency deposits. It should be noted that banks capture deposits in dollars, lend a portion of the deposits to companies that generate foreign exchange – exporters – and the rest is “embedded” and immobilized in the Central Bank. As of 11/09, the total reserve requirements for deposits in dollars in BCRA amount to 7,950 million dollars.

If we assume that the rate of withdrawal of deposits in foreign currency remains at around 400 daily (it has been decelerating in the last days post-stocks) and banks can recover 100 million daily from dollars lent to exporters, we would have a net output of 300 million dollars daily. With which the current stock of lace would reach to return deposits in dollars without difficulties just over 26 business days. Hence, it is so important to arrive on December 10 without more drastic measures, as stated, that the withdrawal of deposits in dollars from banks is greatly reduced.

Be that as it may, all the previous numbers show that without new measures that restrict payments or demand for dollars, with net or real reserves of US $ 13.2 billion, too much uncertainty would be reached by December 10.

Therefore, two negotiations opened by the Government are key. One on the use of the US $ 7.2 billion of the IMF that are in the reserves, for now only for "strengthening." The other to unlock the key disbursement of US $ 5.4 billion pending in the loan schedule with the Fund.

If those currencies were not available, the shortage of dollars would force the exchange market restrictions to increase. Adding more noise and uncertainty to the transition until December. With a probable rise in the exchange gap and possible rearrangement of the dollar to a higher level. And its consequent effect on the inflation rate.

Amlcar Collante

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