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With the dollar falling and the BCRA accounts improving, are we closer or further away from dollarization?


The balance sheet of the Central Bank (BCRA) began to heal through a strong liquefaction of its liabilitieswhich adds to a real fall in the monetary issue, and the purchase of international reserves. Faced with this scenario, more than one will wonder if the dollarization of the economy -the plan that President Javier Milei maintains in his speech-is indeed closer.

The truth is that economists warn that even The monetary authority does not have the dollars necessary to implement it and that, at the same time, the Government generates some contradictory maneuvers for this purposeas it is, the creation of new debt in dollars (BOPREAL).

For the consultant Sarandiin a hypothetical dollarization scenario, the current conversion exchange rate would have a floor of $1,386 (+62.3% compared to the official dollar), an alternative where only the base is exchanged monetary and a neo “Bonex Plan” is applied. At the other extreme, considering net dollar accumulation of short BOPREALs and the broader monetary aggregate, the conversion exchange rate would exceed $6,300 (+640%).

“The automatic balance of dollarization with the current state of the macro would be a surreptitious hyperinflation, adjusting the price level to the availability of dollars in the economy. Beyond the technical criteria, it is important the eventual social and labor effects and the consequences on productive development“, they added from this consultancy.

However, it is important to observe how the monetary base and BCRA reservesand whether or not it is possible to dollarize at current levels.

Central Bank: what happened these months with reserves and the monetary base

According to data from GMA Capital, the Central Bank (BCRA) commanded by Santiago Bausili until last Friday accumulated net purchases in the MULC for US$8,315 millionat an average of US$170 million per wheel. Since December 11, Net reserves totaled US$6,443 million, while the gross revenues reached US$5,651 million.

For their part, from the same consulting firm, they see that The Treasury “is committed to reducing its debt with the Central Bank”. Every time the Ministry of Economy obtains pesos through primary tenders, it uses this liquidity to cancel public securities in the monetary entity’s portfolio. This is about a reduction in the Central Bank’s balance sheet, since an asset decreases against a liability.

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For your partthe monetary base, since the beginning of management, expanded by $987,000 million, but it implies a real drop of 26%. What is the explanation for this expansion? The main emission driver was the purchase of foreign currency by the BCRA in the MULC with $6.25 billionthen the interest on rate-bearing liabilities was recorded, which implied an increase of $5.8 billion.

To compensate, “new liabilities managed to capture 62% of issuance needswith repos (debt in pesos at 1 day) and BOPREALES (debt in dollars at 2025 and 2027) being the fundamental instruments to achieve this.

Finally, “The repurchase of public securities by the private sector implied a contraction of $4.6 trillion”they explained from GMA Capital.

With this level of issuance and the accumulation of reserves: is it enough to dollarize?

For Gabriel Caamanoeconomist at Ledesma Consultant, “It depends how you put it, but If the idea is to dollarize by exchanging some of the aggregates for dollars, the Government would be further away. Of course that seems to be the form of dollarization that was discarded,” he confided to Ambit. What happens is that the monetary base It is only a part and analysts recommend, to see the full picture, see the dynamics of monetary aggregates.

In the last 12 months, all lines presented a contraction in real termsHowever, in the latest auctions of the Ministry of Economy, Puts were issued for at least 77% of the bonds placed by the Treasury in each primary auction. “This is a contingent or masked liability that takes power from any liquefying effect that may exist on the right side of the BCRA’s balance sheet,” they noted from GMA Capital.

For its part, for the consultancy Sarandi“the first relevant analysis on dollarization refers to the conditions of possibility. To begin with, liquid reserves remain in the red zone, although the downward trend since Milei took office has been reversed. At the end of this month, The BCRA’s net dollar position will close close to US$3 billion below. This implies that no dollarization program could be carried out under current parameters without financial reinforcements in foreign currency or without breaching contracts.”

On the other hand, from that consultancy they assured that Javier Milei’s plan contemplates only the liquid dollars accumulated since December and compares them with the pesos in circulation, without considering liabilities remunerated by the BCRA or the debt in pesos of the Treasury. “Such a scheme would require block withdrawal of private deposits and/or define a compulsive exchange of debt for long bonds. Both alternatives seem “poor political viability”they added.

Dollarization: confusing signals, where are we going?

In dialogue with this medium, Sebastian MenescaldiAssociate Director of the practice Eco Go made a detailed analysis of the monetary situation. “In principle, The Central is having more dollars and the amount of pesos is decreasing. In theory, you should be closer to dollarization, but the amount of dollars is insufficient“.

At the same time, he warned that the Government created more debt in dollars, and “that is one of the signs, which is incongruent with going towards dollarization.”

In this regard, he mentioned that, on the one hand, “the Treasury bought debt in dollars from the Central Bank that was supposedly collateral to take more foreign currency to be able to dollarize. On the other hand, The Central Bank is issuing almost US$10,000 million with the BOPREAL to cancel the debt of importers. And that new debt creates a difficulty for you. You are further away from dollarization per se, Therefore, although it is true that you are improving a part of the Central Bank’s balance sheet, there are many challenges ahead and you are still far away.





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