The market reaction to the announcement of the third phase of the government’s economic program, which includes an update of the exchange rate bands and a “pre-announced” reserve purchase program, was positive.: Although the dollar rose by 1% in banks, country risk fell by 10%. In the financial sector, they celebrated the measures but warned that more tools to boost creditworthiness would be needed in the second half of Javier Milei’s term, even in a new system.
The Argentine banks consulted by Clarín assured that they did not expect this change of direction from the central bank, but emphasized it The measures were “expected” by the market and “go in the right direction”. “The announced measures are positive and will give the BCRA more freedom in the implementation of monetary, financial and exchange rate policies,” commented the President of ADEBA, Javier Bolzico.
“The announcements of “strengthening communication” and “normalization of reserve requirements” are welcome. They will bring more predictability to the financial system and create better lending conditions,” Bolzico said, announcing: “It is also convenient for the BCRA to announce aspects of the operational implementation of its monetary program.”
In a private bank, they explained that the announcement of the change of bands was “surprising,” although they emphasized that it was the measure that allowed the dollar’s fluctuating bands to move at the rate of past inflation“It’s an excellent sign”. ““It is the signal that they will not let the dollar fall back due to demagoguery, as governments have done in the past.”said an industry source.
“This can work especially as long as annual inflation remains in the double digits.” If there is a radical decline in monthly inflation, the bands should be recalibratedto avoid further delays,” they warned in an entity.
At the same time, they described the goal of increasing reserves by $10,000 to $17,000 million through “pre-arranged” purchases “compliant and reasonable.” “This did not surprise us because it is what the various officials have communicated publicly. The new thing, if you will, is the 5% cap on participation in the volume of the foreign exchange market,” added another voice from the industry.
The doubt of some people in the banking sector is due to this the effective purchasing capacity of the headquarters. “While the target seems reasonable, in addition to the band cap, 5% of daily volume appears as a limit. If the MULC volume remains at the “average” level of $500 million, they would be something like $25 million per day “those that the headquarters can buy, but in weeks of low volume, $10 million in purchases would be made, with which the target would be required again,” the specialist warned.
One of the keys to this announcement is that the possibility of purchases will be accompanied by an increase in “money demand.” A banking sector source warned that this variable was “difficult to measure” but that if it was indeed the case, it would be difficult to measure It will be the key to normalizing seizures.
This is the point that worries banks the most. Although the government has begun easing cash constraints since November, companies’ liquidity needs remain high by historical standards. “The central bank has indicated it will be cautious about this, but it is important for banks to get lending back to normal.”“said one of the sources interviewed.
With this “tiered” standardization of the topIn 2021, companies still have not seen credit recovery to the extent seen in 2024. “For banks today, default remains the biggest obstacle to loan recovery. But for loans to increase, excess liquidity is not enough, banks must start looking for new funds,” they said.
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