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The dollar paradox: why if there is a record trade surplus, the currencies are not enough?

2020-08-03T13:37:17.799Z


This year a favorable balance of close to US $ 20,000 million is expected. Even so, the economy continues to be hit by external restrictions.


Annabella Quiroga

08/03/2020 - 8:00

  • Clarín.com
  • Economy
  • Economy

2020 will end with a record trade surplus. For the consultants there will be a favorable balance that will oscillate between US $ 18,000 million and US $ 20,000 million. This record will be reached for negative reasons: in the midst of the global crisis of Covid-19, exports will fall between 8 and 12% this year, but imports, due to the collapse of activity, will sink further, with the 20% as a floor.

In this context, Argentina faces the paradox of the dollar : why if there will be a record trade surplus, not enough foreign exchange is generated to keep the economy going?

For analysts, original sin is in the currency gap. The jump between the official dollar at $ 75 and the blue one at $ 136 or the cash one at $ 124, fuels expectations of devaluation, discourages exports and encourages early imports.

From the consulting firm LCG, they foresee for this year a balance in favor of the trade balance of US $ 21,400 million, while for Ecolatina the result will be US $ 18,000 million. Consulting firm Abeceb expects a surplus of US $ 17.8 billion, an amount equivalent to 4.9% of gross product . The previous record had been in 2009 with US $ 16,886 million, which was equivalent to 5% of GDP. 

Although in 2009 the favorable balance was also the result of a strong collapse in foreign trade due to the effect of the international crisis, the scenario was different from the current one: there was no exchange clamp and the country was not in default.

This time the surplus coexists with a stocks that was hardening as the quarantine passed. And despite the purchase limit of US $ 200 per month, the demand for the ticket does not stop growing and once again pushes the gap to rise, which has already reached 80%.

For Guido Lorenzo, director of LCG, there are two reasons why dollars are missing. "On the one hand, the official dollar at $ 75 is perceived cheaply to import and cancel debt . It is an incentive to demand dollars through the commercial or current account channel. They prefer to carry out operations with the idea that in the future the exchange rate will be higher. "

The second reason is the financial account. "That reflects the collapse or imbalance of the peso market that is basically trying to go to the dollar as a refuge of value. The origin of that is the excess of pesos that are in the market . And the exchange gap, which demands an expectation of devaluation highest".

Tobías Pejkovich, an analyst at Abeceb, explains that the almost US $ 18 billion in surplus that they expect for this year is far from the dollars that will actually enter. The reason is that the exchange gap pushes economic actors to under-invoice exports and over-invoice imports to hedge against the effects of the devaluation that they see on the horizon.

An example of this is that between January and May the trade surplus measured by INDEC was US $ 6,618 million. However, the balance in favor registered in the Single Exchange Free Market (MULC) in the same period was US $ 3,686 million.

As the exchange gap widened, the surplus gap was doing the same. Thus, in April the accrued surplus was US $ 1,400 million and the cash base surplus was US $ 292 million.

When there was no exchange gap, these numbers were closer. In fact, in April 2019 the balance in favor recorded by INDEC was US $ 1.6 billion and that of the MULC was US $ 1.9 billion. And in the 2019 record, the INDEC counted almost US $ 17,000 million and the MULC registered US $ 16,300 million.

Hoarding grows

In the quarantine and despite the stocks, the demand for dollars for hoarding increased . "There was a sharp drop in consumption and entertainment spending, which made it possible for a part of society to allocate more pesos to save through the purchase of dollars, despite the strong restrictions." Thus, the number of people who buy dollars monthly jumped from 500,000 per month in the summer to 1.2 million in May and 3.3 million in June. For July, market estimates indicate that there would have been 4 million Argentines buying dollars.

The rise in the exchange gap - in a few months it jumped from 30 to 80% - also stimulated the acquisition of dollars to "puree" : buy at $ 99 in the official to sell at $ 132 in the blue. A "profit" of $ 6,600 a month.

In this way there is a demand for dollars that remains firm while the supply is shrinking , which means that the Central Bank has to go out to sell to supply the market. So far in the quarantine, June was the only month in which, thanks to the tightening of the stocks for importers, the monetary authority was able to buy foreign currency to rebuild reserves. But in July, it had to re-adopt the selling position in order not to validate a faster devaluation.

How will the exchange market continue? Pejkovich points out that "the stocks are not going to loosen. And if the trend of the greater demand for dollars for hoarding continues, given the scarce reserves of the Central Bank, a sustainability problem will be generated. We must avoid a drain on reserves. And that It is achieved by adjusting via price -devaluation- or by quantity, further adjusting the stocks. "

For the economist, if progress is made in debt restructuring, there will be room for expectations to improve and the gap to narrow. Abeceb expects the gap to be 55% at the end of the year and 40% in 2021, the year in which the surplus would be around US $ 17,000 million.

Source: clarin

All business articles on 2020-08-03

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