BUENOS AIRES: Central Bank foreign currency reserves plunged to a nine-year low yesterday as the demand for dollars continued to increase in the run-up to the key November 22 presidential runoff.
The daily amount sold by the Central Bank also increased, rising to US$170 million yesterday, totalling more than US$600 million for the week and prompting reserves to plunge by US$94 million to US$26.7 billion — their lowest level since August 2006.
The previous low for reserves was reached in April 2014, when the Central Bank’s coffers totalled US$27.72 billion.
Pressure on the monetary authority’s coffers is on the rise as grain exporters hold on to their production expecting better prices after the election season ends and individuals buy as many dollars as the AFIP tax bureau authorizes at the official dollar rate.
While limits on imports continue to be in place, the industrial sector’s complaints about needing dollars to buy supplies from abroad or else risk halting production mean that the government has found few remaining options to stop the drain on reserves.
The alternatives to losing reserves — tightening restrictions or letting the peso devalue — are not on the table for the moment as they would affect economic activity or salaries’ purchasing power on the brink of the election.
With both presidential candidates hinting that a devaluation of the official exchange rate is inevitable to a degree in December and the surprisingly good showing last month by Mauricio Macri of Let’s Change — who has proposed a sudden liberalization of the dollar trade — those who have the greenback stored are less likely to sell them while peso-denominated wage earners try to get hold of as many cheap dollars as possible.
Demand for dollars
More than US$67 million were sold yesterday through the dollar for savings scheme, with tourists taking an additional US$3 million and US$42 sold to pay for energy.
That means that more than US$374 million have been sold in the first four days of the month through the dollar for savings scheme, keeping November on track to reach the largest number of sales since the programme’s creation in 2014.
The scheme allows wage-earners with incomes above a floor set by the AFIP tax bureau to buy dollars at the official dollar rate, which had been restricted for retail savers since the so-called “clamp” on the dollar began in 2012.
Many of those dollars are then sold back by individuals for a profit at underground exchange houses, which pay black-market prices for them.
Yesterday saw the sixth consecutive day of decline in the price of the black-market dollar, which plunged 32 cents to reach 15.14 pesos, a two-and-a-half month low.
As the official dollar price was up by just half a cent, as has been the norm throughout 2015, the gap between the official dollar rate and the black-market rate continued to plunge too, reaching 58 percent, down from 70 percent two weeks ago.
Speculation about a devaluation of the official exchange rate has pushed the illegal dollar’s value down, as it could allow for more room to ease restrictions on official dollar sales, pushing black-market demand lower.
Grain hoarding
Exporters are now more confident than ever that profits will soar next year, creating an impact of plunging sales abroad and reduced cashflow in the Central Bank’s coffers
A report from the CIARA-CEC grain exporting chambers on Monday said that last week was the worst of the year in terms of dollars brought into the country, as the sector’s business leaders see holding onto grain as the most profitable course of action ahead of economic reforms that would also lower taxes for the sector.
Exports last week fell 68.5 percent in terms of a yearly comparison, reaching only US$192 million — far below the normal weekly average.
The only comparable period in terms of sales came in mid-February, when US$180 million was brought in over a short, three-day working week amid Carnival celebrations.
Central Bank authorities are working to tap alternative short-term sources of dollars by negotiating an extension of the currency swap with China, which loaned the equivalent of US$11 billion to the country in 2014.
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