In the first week of the new phase of the "zero emission" plan, the Central Bank of the Republic of Argentina (BCRA) ended with a negative balance of US$105 million in the foreign exchange market. Concurrently, the gross international reserves dropped by US$708 million, reverting to levels seen at the beginning of April.
According to currency trader Gustavo Quintana, the BCRA offloaded US$106 million this past Friday, marking it as "the highest daily sale of the month and the most significant since June 19." This resulted in a US$42 million reduction in reserves, leaving them at US$27.566 billion.
Inflation, Devaluation, and Decline in Purchasing Power: Factors Behind the Fall in the Internal Market
This isn’t favored by authoritarians, as the practice of professional and critical journalism is a fundamental pillar of democracy, which irritates those who believe they own the truth.
Despite the weak weekly performance, the cumulative net purchases for July remain positive at US$122 million. Since Javier Milei took office in mid-December 2023, the accumulation of foreign currency has surpassed US$17 billion.
Economist Gabriel Caamaño noted a spike in the trading volume on the Mercado Abierto Electrónico (MAE) to US$342 million, compared to an average level of US$200 million. "The high volume in the wholesale currency wasn’t due to abundant liquidation, but strong sales by the BCRA. Today’s US$42 million drop in gross reserves was due to yesterday’s activity. Today’s sales will affect Monday. This explains why the CCL stayed firm," he explained.
Indeed, the government’s strategy effectively contained financial segments of the dollar. The "contado con liquidación" dropped by 5.8% to $1,328 over the week. The MEP fell by 5.9% to $1,331, and the blue dollar decreased by 3.7% to $1,445. Consequently, the exchange gap stood at 43% when compared with financial quotes and at 55% with the free-floating dollar.
"Since April 23, the exchange rate has appreciated by 40.1%, while the BCRA’s intervention in the MULC initially accumulated purchases of around US$4 billion but now shows sales of US$143 million," noted Aurum Valores.
IMF and Imports: Reasons Behind the Reserve Decline
Recent financial shifts were dominated by halting emissions to purchase dollars. To narrow the gap between the official exchange rate and parallel rates, the Ministry of Economy and the BCRA devised a strategy involving interventions in the CCL and MEP to sterilize emitted pesos while simultaneously supplying the market to curb price rises.
Simultaneously, the Treasury paid a debt installment to the International Monetary Fund (IMF) of US$640 million, and the Central Bank sold dollars to import energy during the winter season. Both factors contributed to the decline in the Central Bank’s holdings.
Furthermore, the entity led by Santiago Bausili completed the repurchase of 78% of the stock of options held by banks. The operation saved a potential emission of $13.2 trillion. Although some options remain in financial institutions’ portfolios, this marks a significant step towards lifting currency controls.
