7.7% of inflation in March was followed by 8.4% in April: the blow to the pockets of families is powerful and presents few loopholes.
If at the end of the year people had pesos and thought about saving, now their forecasts are aimed at advancing consumption in basic necessities. The price of food tops the concerns.
The inflation of food consumed at home would reach 8.6% in May despite having slowed the rate of increase in the last week of the month, according to the survey of the consultancy Eco Go.
With a predicted rise of 9% or more in the cost of living, the race for the protection of the pesos occurs simultaneously with the search for coverage of investors and companies against a possible devaluation.
In a context in which inflation beats wages, pensions, the fixed-term interest rate (8% per month) and the variation of the official dollar (7%), the race is very unequal and pronounced for peso holders.
At the same time, the fact that the official dollar ($ 239) increases to 6/7% monthly when the food index does so at 8.6% is indicating the relative power of the official exchange rate to contain the prices of the basic basket. Delaying the dollar lost effectiveness as an anchor to contain the cost of living and the exchange rate gap acts at the heights as a parameter of the expectation of devaluation.
Financial operators navigate in ambivalence between those who are sure that the government will not arrange a jump in the official dollar before the primary elections on August 13 and those who doubt the difficulties of transiting to the PASO without hard and sound dollars in the reserves of the Central Bank and with a gap of 100% between dollars.
Of course there are variants. Fernando Marengo of Black Toro maintains that the government "does not want to devalue the suburban dollar" (the official one for food prices and elections) but does not rule out variants of some other agricultural dollar despite the fact that the cereals say that there are no grains left to liquidate.
The scenarios projected until the end of the year by economists agree on two central issues: 1) that the economy minister gets fresh dollars and 2) the conditionality with which the currencies come.
Sergio Massa needs freely available dollars to put on the table and demonstrate to the market that not devaluing is possible, even without having to significantly open the trap to imports that already registers outstanding payments of more than US $ 10,000 million.
Until that can come, the process of hedging against steeper inflation or devaluation is pronounced.
Companies build up inventory and sell to cover operating costs and not much else.
The jump in share prices from mid-March to here shows that there are investors who bet on papers of companies with an export profile.
Since mid-March, the shares of Aluar rose 91%, Comercial del Plata, 42% and YPF, 70%. Also energy: Transportadora de Gas del Norte increased 106%.
Is it a greater refuge to have shares in the Caja de Valores than in financial institutions, for example in the case of a crisis that leads to debt restructuring?
Some of that may weigh, but also the negotiable obligations of companies in dollars are the star of large investors.
Private bonds tied to the official dollar (dollar-linked) are sought after to the point that, in some cases, they offer negative rates of the order of 8%.
The GD30 global bond with law in New York has a rate of return of 42% in dollars. It promises an important prize that few seem willing to take advantage of.
The coverage process, in addition to the expectation of a possible devaluation, is also based on the dollarization proposal that Javier Milei has been agitating in case he wins the elections at the end of the year.
Of course, we will first have to wait for the result of the PASO and the electoral fate of Milei, but studies on dollarization and comparative analyses with the Ecuadorian scheme are the order of the day.
A technical analysis on whether the dollarization of Anker Latin America (Luis Caputo) circulating these days is viable raises possibilities and objections.
Without taking sides on whether dollarization "is the optimal monetary/exchange scheme for Argentina," he highlights two important points.
One is that with the monetary data as of May 17 and a dollar of $ 490, "the BCRA should have assets in dollars (bills or market value of assets) for US $ 40,800 million."
The other issue to consider is the fiscal one: "the financial surplus consistent with this year should be of the order of 2.5% of GDP, which would imply a fiscal adjustment of around 7% of GDP."
The risky bet of dollarization to lower inflation would require many dollars and a fiscal adjustment of magnitude, in addition to strong political support for the adventure.
Meanwhile, the process of currency hedging/inflation continues and foreign investors keep Argentina off the radar.
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