President
Javier Milei
ruled out that Argentina's dollarization could happen this year because "the time is not right."
And he added that "
dollarization is the final step
of an entire process that begins with the sanitation of the Central Bank and then advances in the reform of the financial system and then in the end it (the BCRA) is liquidated. That reform is to create an anti-run bank and Once this anti-run reform is done, you can move on to a free banking system," the President concluded.
If anyone thought that Mile had abandoned his dollarization idea during the election campaign, they can begin to take note of what is happening with fixed-term deposits in pesos.
The collapse of fixed-term placements began in December, when the Central Bank set the rate for retail deposits in pesos at 110% annually (9.1% monthly).
An income of 9.1% compared to inflation that was 25.5% and a projection of just under 20% for January was a compelling argument to cause
the flight of those deposits
.
The fixed-term volume, which a year ago represented 52% of total deposits, is now around 37% and in January it falls below the pesos placed in savings accounts.
Thus, depositors in pesos at an interest rate entered the historic process of peso liquefaction that the government unleashed and that began with the sharp drop in the interest rate of the Liquidity Bills (Leliqs) with the objective of dismantling the "mountain "of the liabilities of the Central Bank that the previous government had strongly fueled.
In this process led by
Luis Caputo
, the Central Bank reduces its liabilities and aims to improve its balance sheet, the banks download Leliqs in exchange for borrowing from the Treasury and the fixed rate depositors who rush to find an alternative lose.
For one of them, inflation-adjustable fixed-term
deposits
(UVA), the Central Bank extended the minimum placement term from 90 to 180 to make it less attractive and the banks are not very tempted to take them because they do not have another indexed loan taker. other than the Treasury.
Another source of peso absorption is the purchase of
Bopreal
(Bond for the Reconstruction of a Liberal Argentina) by importers through which the government recognizes a debt from the previous government by absorbing pesos and issuing debt in dollars.
Another indicator of the official direction towards dollarization.
After the 54% devaluation in December, the government has more dollars (the Central bought US$6,000 million) and with the liquefaction, many fewer pesos.
A relevant technical data is in the latest report from the Capital Foundation which maintains: "the stock of monetary liabilities (monetary base plus remunerated liabilities)
contracted a real 24.3%
in the first two months of management (-31.3% year-on-year) and is at $39.4 trillion, at the lowest levels of the last 20 years, along with the September 2019 period."
There are fewer pesos and more dollars, but the release of the exchange rate will take time and a 50% exchange gap after the government raised the official dollar by 118% in December is not a good indicator.
The President's decision to remove the
fiscal chapter
(increase in withholdings, Profits, moratorium, money laundering) from the negotiation for the Omnibus Law added degrees of uncertainty about how the Treasury will compensate for the lack of those resources to balance the accounts.
There are also doubts about how the exchange rate scheme will continue after February, when
the official dollar is supposed to rise another 2%
in the face of inflation that is at least eight times higher.
An unanswered question is whether Caputo's order of priorities comes before moderating inflation or raising dollars to meet the goal agreed with the IMF of accumulating US$10 billion by December 2024.
The dilemma is not minor: if it devalues it could get more dollars, but it would also run the risk of causing another inflationary jump.
But, if it does not do so, it will be able to consolidate the exchange rate as an
"anchor" to curb prices
, but it would discourage the liquidation of foreign currency from exporters.
In the middle, it has the possibility of accelerating the rate of increase of the official dollar by a percentage significantly lower than inflation to give it partial signals about the intention to slow down the rise in prices, but at the same time, prevent the dollar from falling behind.
For the Capital Foundation, total dollarization of the economy is not close either for a specific reason: the government would need the current equivalent of
US$20 billion
, a figure that is difficult to visualize how it will achieve it.
The heat and lack of rain in recent weeks once again put the focus on the results of the soybean campaign, a key source of dollars for the start of 2024 that also allows for changing the tone of a management start characterized by the strong liquefaction of pesos and the purchasing power of pensions and salaries.