“The changes are welcome, but at this level of reserves much of Argentina’s fate is out of its hands.” the chief economist of one of the largest banks in the United States told LA NACION from New York when asked about this week’s central bank (BCRA) announcements. In particular, the analyst emphasized that the ranges within which official dollar movements move from 2026 will begin to adapt to the pace of inflation and that the intention to accumulate foreign currencies has been reiterated, although without a concrete roadmap.
The economist’s vision coincides with that of others Wall Street banks in reports sent to its customers in recent days, after learning of the official measures. The main questions include both the rigidity of the exchange rate system and the limited ability to strengthen the coffers of the monetary authority, in a context where the risks of shocks The inside and outside remain latent.
This diagnosis is shared by international companies, investors, analysts and the International Monetary Fund (IMF) itself, which is closely following the program of the Minister of Economy Luis Caputo and the President of the Central Bank Santiago Bausili. Although the announcements were received positively by market participants, there is consensus that Argentina remains in a transition phase.
“There is consensus that exchange rate policy should be adjusted, especially considering that inflation remains at or slightly above 2% per month. “While the call for a fully floating exchange rate regime is not abandoned for now, at least some exchange rate flexibility will be added,” Morgan Stanley said in a report accessed by this media.
According to the company The decision “is likely to ease tensions with IMF staff.” and help the country obtain a waiver at the second review due to failure to meet the December 25 reserve accumulation target.” In addition, he assumed that discussions on a financial program in January and February could be more fluid than expected as these changes were already being implemented.
For JP Morgan, Argentina is heading in the right direction. “We are slowly but surely laying the foundation for the macroeconomic outlook we envision.” Anyway, The US bank does not expect any exchange rate fluctuations in the short term, with the buoyancy of a larger dollar supply from corporate and provincial debt as well as a good harvest. In this context, the investment recommendation shifted to inflation-linked bonds at the expense of exchange rate hedging strategies.
“It’s a step in the right direction. to strengthen the country’s financial position, albeit inadequate to ensure the stability of the BCRA balance sheet in the face of volatility episodes,” said a BBVA Research report published on Friday.
Parallel to that Standard & Poor’s Global Ratings (S&P) upgraded the rating of Argentine debt days ago in foreign currency and long term, from CCC to CCC+, according to the Central Bank’s announcements. The agency justified the decision with a strengthened political position of the government after the victory in the midterm elections and with a reduction in macroeconomic imbalances.
After the reset is complete, The country rating was compared with those of Moody’s Ratings and Fitch Ratings. However, despite the progress, the rating is still seven levels below the stated level Investment grade (Investment Grade), a category that S&P Paraguay moved into this week by raising its rating to BBB-.
Improving skills is central to the objectives of Caputo and Bausili. Both repeatedly pointed out that during their two years in office the purchase of reserves was a record high, but that the net accumulation was practically nil as the foreign currency was used to make cash payment of the debt maturities. The official thesis is that the monetary authority could keep the dollars generated in the market once access to markets to refinance obligations is restored. a strategy different from that recommended by banks, analysts, investors and the IMF.
“We could increase the credit rating over the next year “If we see an improvement in external liquidity, a decrease in economic vulnerability and greater political certainty,” S&P expected. According to the agency, appropriate management of inflation and the exchange rate could lay the foundation for sustainable stability and growth, Facilitate access to voluntary financing in both external and internal markets to cover foreign currency debt maturities in 2026 and 2027.
The agreement with the IMF set a target of ending the year with a net external reserve position of $3 billion. “According to the program methodology, the current level is approximately -$16.5 billion, which represents a deviation of approximately $13.5 billion from the year-end target,” said a Fundación Capital report. At the last review of the program in July, the IMF had already made the central bank’s reserve target more flexible by $5 billion.
The government must face this A payment of $4.2 billion will be made to private bondholders next January 9th. and the economic team’s intention is to demonstrate that the reserves have not been used to terminate maturity. The Treasury has about $2,000 million between purchases and recent dollar bond placements, as well as discounted foreign exchange interventions in recent days.
Among the Options to get the rest, mentioned by Caputo, involves the activation of another section of the to exchange with the United States, of which $2.5 billion has already been used, in addition to the to exchange with China, a repo agreement with international banks and the placement of bonds under foreign law. Country risk reached 600 points this week, but is still above the level needed for Argentina to reissue debt in international markets.
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