companies sell to pay TAXES and WAGES

After a week in which the central bank managed to contain the progress of dollar at parallel market, the end of the month could give it another push and, according to the vision of some analysts, perhaps collaborate so that the stability of the currency is maintained for a few more days.

This is basically because some companies could sell some dollars to face typical month-end and mid-year obligations: payment of wages, bonuses and certain tax maturities.

It is a typical seasonal currency sale by people in need of pesos. In the next few days there will be a series of maturities, such as Profits this week and then advance payments on Personal property more Earnings for individuals. All in a context of lack of liquidity of the companies, which have exhausted their boxes due to the drop in sales imposed by the quarantine.

So, while on the one hand the gap between the official exchange rate and the blue makes it the least attractive time to go out and sell dollars, it is also true that for some companies, going to their dollarized savings will be the only possible way of power pay taxes and bonuses.

Although it is impossible to calculate how much the volume of that sale may be, market analysts believe that this need for cash on the part of those who see the AFIP calendar coming on top could make the sale greater than in a context of normality.

So there is a certain market exchange rate calm expectation, since the unexpected private offer could be combined with the effect of the measures of the central bank so that the price remains contained.

Without exaggerating optimism, in the City there is talk of a reasonable probability that Miguel Pesce feel less pressure than it took you in the previous weeks to have to sell between 50 and 70 million dollars a day from reserves.

“There is a seasonal issue in the last days of each month that causes the cash store to drop, due to the use of dollars from large companies (and some girls as well) that go out to sell dollars to meet urgent payments” , says Santiago López Alfaro, partner of Delphos Investment.

And he added that “in addition, it must be taken into account that positive news on which the negotiations for the debt settlement also helped the counted with liqui get off. ”

On Friday, the dollar counted with liqui closed at $ 113.92, a value that remained stable in the last three days of the week and that marked a clear downward trend, as it had started the week at $ 118.80.

Apparently the restrictive measures that the Central had taken weeks ago (to limit the investments in dollars of the Mutual Investment Funds, to control the large buyers of cash, etc.) added to the decision of increase the interest rate floor to 26.6% that banks must pay a wholesale investor for a fixed term (more than $ 4 million) helped contain the rise in free dollars.

This week, the companies’ need for pesos could help this trend continue.

“The same story that happened last month and the previous month is repeated, when there was some downward pressure to pay salaries, something that also happened at the end of the year when the Christmas bonus had to be paid,” says Gustavo Neffa, director of Research For Traders.

However, he warns that “the pressure that this can exert on the dollar must be taken with tweezers, because the risk premium is going to be high in the next ten days until something is accomplished around debt restructuring. ”

Without taking your eyes out of debt

What Neffa wants to make clear is that, perhaps the appearance of some dollars offered in the market may help the price to remain stable in the short term, but in the long run what will determine if the dollar continues to rise strongly or no it will be the result of the debt negotiation with creditors, especially those with titles with international jurisprudence.

“70 or 80 percent of the behavior of the blue dollar has to do with uncertainty about debt management,” López Alfaro agrees, after recalling that last week the cash settlement fell “largely due to the positive expectations that arose regarding the possible debt settlement.”

And he adds that “we must not stop looking at what happens in the markets of the regionbecause a few days ago in Brazil the dollar was worth 6 reais and now it is worth 5.40, cast Also helps for the dollar in Argentina to be more contained. ”

That is the general perception that the main market analysts have regarding foreign exchange: if the debt negotiation goes well, the price of the dollar could be easier to contain.

If, on the contrary, it fails, nobody dares to predict what could happen to the exchange rate in our country. Especially if, if the debt negotiation with the bondholders does not prosper, the Central Bank would be forced to continue issuing weights at high levels to inject funds into the local economy.

“On the one hand, the government is a little calmer with the dollar, given that it loosened last week, partly because of the restrictions it placed and partly also with the requests for information it made, trying to generate market self-regulation,” Norberto Sosa summarizes, IBE director. However, he does not fail to point out that “beyond some other explanatory variable, bottom trend is bullish in terms of exchange rate, because it is deteriorating the patrimonial situation of the BCRA”

The underlying problems continue

It refers to the loss of reserves that the Central Bank is suffering day by day, since in recent weeks it has been the main seller of dollars. Last week, without going any further, he sold around 50 million dollars per day – although in one day he had to put 70 million on the table – and the official dollar ended the week at $ 70.

Meanwhile, the Central’s reserves ended the week at 43,741 million dollars. Meanwhile, the monetary base continues to increase strong product issuance of pesos that the Central has had to do to sustain an economy paralyzed by the pandemic of the Covid-19 and by the Government’s decision to maintain the quarantine as rigid as possible to take care of the population’s health.

And the issuance of pesos, if the negotiation with the creditors does not go as they expect in the Government, is what worries many analysts.

High monetary issuance is seen as the underlying theme in the parallel dollar getaway

“If there is no agreement with the bondholders, who knows how much the Central would have to issue to try to start the economy, and it is impossible to calculate what inflationary impact it would have that and how it would affect the price of the dollar, “assures an experienced market analyst.

Perhaps for this reason, Norberto Sosa insists that “beyond that if someone sells dollars to pay bonuses or some taxes, it seems to me that the central issue is how the debt negotiation continues to progress. ”

That, we will only know in a couple of weeks. Meanwhile, if those who are willing to sell your dollars in a market where supply is almost restricted to zero, they will undoubtedly help the Central Bank’s objectives, at least to recover the calm feeling for a few days.

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