Dollar, expensive or cheap in Argentina?: what the BCRA says and the verdict of the City on the exchange rate

This Tuesday, the president of Central Bank (BCRA)Miguel Ángel Pesce, assured that he does not see a delay in the evolution of the price of dollar in Argentina and pointed out that what should be observed to carry out this evaluation is not the nominal exchange rate, but the real multilateral.

Thus, he explained that what must be taken into account to make value judgments in this sense is the evolution of inflation in the countries with which Argentina trades and that of our own devaluation.

It should be mentioned in this regard that the Real Multilateral Exchange Rate (TCRM) It is an indicator that measures the relative price of the goods and services of an economy with respect to those of a group of countries with which commercial transactions are carried out.

Thus, although the official dollar Today it is trading at $118 and the BCRA has increased its rate of appreciation to an average of 4% per month recently, which is a significant delay in recent months if you take into account that inflation was 6.7% in March and 6% in April, the official mentioned that the inflation of the country’s main trading partners, which are China and Brazil, has accelerated in recent times and that, in the case of the Latin American giant, there has been a process also devalued. This neutralized possible delays in the parity of the peso with the US currency.

On the other hand, Pesce denied recent rumors about the existence of comments by the International Monetary Fund (IMF) regarding the evolution of dollar price in the country and said that there is no devaluation goal in the agreement with the agency.

These statements from the head of the BCRA in a radio program raised doubts in different economic sectors as to whether the dollar is expensive or cheap in Argentina.

The president of the BCRA considers that the multilateral exchange rate is competitive today.

Dollar in Argentina: is it expensive or cheap?

In response to the question, the economist Pablo Ferrari tells iProfesional that, “In historical terms, the exchange rate it’s not low” and considers that the pressure for the nominal exchange rate to rise is mainly from exporters who sell their products in Dollars abroad, but they have costs in pesos at the local level.

Ferrari warns that the cost of a higher devaluation of the peso “would be an increase in inflation, which is already high in Argentina”.

In a more moderate position, the economist from Epyca Consultores Joel Lupieri, who points out that “the multilateral exchange rate is today at the minimum for this Government”, although it is true that it is not at the minimum it once had in the administration of Mauricio Macri or Cristina Kirchner.

Thus, he explains that a value of 105 points, which is what we have today with the United States, does not seem to be an exchange rate to rely on in terms of competitive advantages, since during the presidency of Alberto Fernández an average exchange rate was observed multilateral in the order of 115 or 120 points (of the TCRM index). Thus, he considers that “we would have to see if the current exchange rate can give oxygen to exports or if we are no longer competitive.”

A few days ago there were rumors of claims from the IMF for the price of the dollar.

A few days ago there were rumors of claims from the IMF for the price of the dollar.

Dollar: others still see it cheap

However, not all economists agree with the above view. One of them is Jorge Neyro, who points out that “the president of BCRA refers to the multilateral real exchange rate, which appreciated almost 5% in the last month and thus followed the 2021 trendBut he mentions that, in the middle, there was a big devaluation of emerging currencies, such as the real and the yuan and that the peso did not accompany to the same extent. Consequently, he believes that this means that there is a growing backlog of the dollar.

“Not surprisingly, the BCRA this Tuesday it devalued $0.21, the highest daily rate in a long time”, he points out as proof of his observation. And he explains that this is because the exchange rate fell quite a bit behind in the last month, which, according to his vision, It should be corrected if the emerging currencies do not appreciate again in the short term.

In the same sense, the economist Federico Glustein thinks, who points out that “the dollar it is late”. The analyst considers that there are some variables that demonstrate his vision, namely:

  • The Multilateral Exchange Rate Index is at levels of appreciation similar to those of the beginning of 2018 when there was a strong devaluation which indicated that there was a delay.
  • Demand for Dollars for consumption imports and the result of the trade balance show that the trade surplus is increasingly reduced in a scenario where agriculture has record liquidations.
  • Finally, he points out that, since 2019, with a dollar that had regained competitiveness, the peso appreciated by approximately 22%, having to depreciate the currency by approximately 30% to recover ground.
The question is whether the dollar is expensive or cheap in Argentina.

The question is whether the dollar is expensive or cheap in Argentina.

Fair price for the dollar: what would it be?

Thus, for Glustein, “the dollar Breakeven should be at least 20% above current price and keep pace with inflationespecially since globally the US currency is strengthening”.

For his part, the economist and head of Macroeconomics at Equilibra, Lorenzo Sigaut Gravina, mentions that “the exchange rate has been appreciating 7% so far this year compared to the price with December 2021” and this is due to the fact that the price of the dollar as an inflationary anchor”. He assures that last year’s exchange levels reflected a slight delay, which made it uncompetitive, and that this year it is further behind.

He warns that the exchange rate cannot be delayed any longer and that the BCRA needs to accumulate reserves by accelerating the evolution of the dollar so you don’t get late.

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