This short week and the month of January will test if the Argentine administration of president Mauricio Macri can continue to build up Central Bank reserves following on the decision to end the dollar clamp, let the foreign exchange float, together with the prospect of loans and hoarded grain sales.
Despite Christmas made the week short foreign currency reserves grew by more than US$140 million on one day, as exports outnumbered imports, taking advantage of the new foreign exchange system.
Last Thursday was the fifth consecutive day of growing reserves, although not enough to revert the losses registered by the Central Bank in the month so far. The bank currently hold US$24.86 billion, having gained US$700 million since the clamp on foreign trade was lifted on December 17.
The question now is whether that trend will continue in the near future. So far, supply has out weighted demand as the Macri government’s agreement with the biggest agricultural companies to start selling grain immediately after the liberation of the foreign exchange ensured hundreds of millions per day came into Argentina.
However there are some question particularly regarding reaction from the farming and export groups and the impact on prices: in effect the exchange rate has remained below what Finance Minister Alfonso Prat-Gay hinted as its equilibrium rate — 14.20 Pesos per dollar. Since the clamp was lifted, the peso always remained below the 14-pesos-mark. It currently stands at 13.39 pesos per greenback.
With estimates saying that around US$8 billion in grain might have been hoarded by exporters in the build up to the devaluation, supply is expected to stay high for some months. Even if the first quarter of the year is usually the poorest in terms of exports, the sale of the hoarded grain means that it is likely to be the best first quarter in a decade, according to estimates from the conservative IERAL think tank.
After that, the best quarter of the year kicks in with the harvest of soybean in April. And the Macri government is also expecting a large loan from international banks in the coming days.
This means that theoretically the combination of factors would mean that the new administration would have an unusually good inflow of dollars to help ease the transition between the old and the new exchange rate regimes, but analysts expect to be difficult due to soaring prices, reduced demand and unions announced actions to keep up with inflation.