The official intern that was opened within the Ministry of Economy due to the increase in rates unleashed a political crisis that will have an impact on the price of Argentine assets. City analysts believe that, beyond the resolution of the conflict to which the Government arrives, the backroom of the fracture within the executive branch will translate into red numbers for Argentine bonds and it will put even more pressure on the foreign exchange market.
The intention of Martin Guzman to displace the Secretary of Energy, Federico Basualdo, involves a key step in its economic strategy: the rate update is at the center of their agenda, since leaving them frozen as up to now would generate an even greater increase in the monetary issue, which would end up heating prices even more and would imply an extra devaluation pressure for the exchange rate.
And, that this play is there, at least, put in doubt, generates fears in a market where mistrust towards the country is listed high. “That the interior of the Government does not reach an agreement on an issue as decisive as the increase in rates, it is sno doubt bad news “said Cohen’s chief strategy officer, Martín Polo. “And beyond the situation of weakness in which Guzmán was placed, but rather doubts about the government’s plan“, he added.
For the economist, eThe timing of this crisis is not good either, at a time when the agreement with the Monetary Fund still seems far from being closed. “It is also a bad sign because the issue of tariffs is on the negotiating table with the IMF. If the Minister does not have enough backing to execute something as specific as this …
In this sense, José Echagüe, from Consultatio, agreed: “What is at stake is not Guzmán, but his agenda“, he said and added:” The Minister had an agenda with three or four very clear vertices: renegotiating the debt with international organizations, consolidating the fiscal deficit and rebuilding relative prices. So, Basualdo intervenes within a larger chess. If it is not Guzmán’s agenda,what is the government’s agenda? What happens if we run out of agenda? All that uncertainty is paid for with falling prices “.
The consensus is that the lack of certainty is a drag that makes investors prefer escape, even more, the Argentine risk. “Investing in some way is about trying to predict the future. If there are counter-marches, contradictions, it generates noise and this generates investment exit“, a local stock exchange operator assured in strict off.
The Argentine debt market in dollars has been heavily punished after the swap last September and the Government is unable to give a signal that will make the country risk drops below the 1,500 point mark. “Argentine bonds have got a lot of negative news, that’s why the values that they drag and the rates that they yield. The figure of Guzmán is very important for the market: he has been from the beginning, he did the debt restructuring, all the accommodation of the curve in pesos and is working on the debt with the IMF. If it is not fixed in the short term, you can see a new correction within the floor we are on“warned Santiago Lopez Alfaro, from Delphos.
But the concern of analysts is that if Guzmán comes out of this fight weakened, noise will be generated in the local debt market. “Although dollar bonds are very depressed, what you have to look at closely is the enormous space that there is for bonds in pesos to begin to operate downward. If there is an exit of pesos from this debt curve, there are huge risks associated with the exchange rate, “said Echagüe.
Still, analysts are not expecting abrupt price movements, but rather a market that is keeping an eye on how this political conflict is resolved. “For the market, an eventual departure of Guzmán it would imply a more heterodox economic course, in a very weak context “, said Augusto Posleman of PPI. “On the contrary, if it ends up strengthened, it would be a good sign, which will have to be confirmed with concrete facts, although there is little expectation that it will happen,” he said.
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source https://pledgetimes.com/the-guzman-basualdo-fight-may-impact-the-price-of-bonds-and-the-dollar/
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