The announcement that the International Monetary Fund (IMF) reached a technical agreement with the Argentina to open an extended line of credit of 48 months in the total amount of US $ 20 billion It should bring some instant relief to the Central Bank of the country, which has bleeding the few dollar reserves in search of some stability. But it should also bring a requirement for change in currency politics, with a transition from the rigid current controls (the “stocks”) For the modality of currency bands, according to local media reports.
Basically, this Floating band system It defines a space or non -intervention area for the Central Bank. That is, it establishes a floor and a ceiling for the exchange rate to move according to market supply and demand. Within these quotes, the monetary authority cannot buy or sell foreign currency. This model has already been established in Brazil in the first phase Real, between 1994 and 1999.
According to the economy manuals, within the band, the expected rate of domestic currency depreciation is negatively related to the exchange rate. When the exchange rate is high and at the top of the band, the currency is weak and can no longer depreciate. The exchange rate remains at the top or walks into the band and thus the expected currency depreciation rate is negative.
Similarly, when the exchange rate is at the bottom limit of the band and the currency is strong, the expected currency depreciation rate is positive.
For Argentina, this partial disarm of the “blind” will begin to normalize the functioning of the economy and give the productive sector more certain about the willingness of dollars to rotate abroad. But at first it can cause difficulties for investments because of the most expensive dollar during the transition.
The Argentine BC and the National Value Commission (corresponding to the Brazilian CVM) will be able to accelerate its current policy of opening the controls, removing regulations as restrictions of companies to the dividend turnaround abroad. This can unlock an estimated stock between $ 6 billion and $ 10 billion.
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The biggest doubt in the country is the fair value for the exchange rate. The official BC quote is 1,116 pesos per dollar, with the BC continuing a 1% monthly adjustment in the system called “Crawling Peg”. But the most commonly used parallel quote in the country, the “Blue Dollar” is 1,360 pesos on the streets of Buenos Aires. Financial quotes used by companies and exporters (MEP and CCL) are 1,376 pesos and 1,368 pesos, respectively.
On Monday (7), the Report on Market Expectations (REM)-which corresponds to the Focus of Brazil Bulletin-pointed out a expectation of almost gearbox stability, obeying the gradual system of “Crawling Peg”, even the parliamentary elections of October. But by the end of the year there was already a quotation forecast of 1,253 per dollar, which means a 7% increase in the February REM projections, which estimated 1,157 pesos per dollar.
