Blue sees red

Perhaps we finally know why blue is the latest colour for the unofficial greenback — it is heading for the sky. Yet despite the heavenly destination, there are no theological mysteries to the “blue dollar” soaring to the 8.75 pesos which prompted the recently returned President Cristina Fernández de Kirchner to summon the top brass of her economic team to a hasty meeting in Olivos presidential residence on Wednesday evening. Firstly, the steep climb is an automatic reflex to Monday’s surcharges on foreign travel, something which accompanies every lurch in economic policy and turn of the screw. And secondly, blue dollar prices are not very much more real than the wishful thinking of the official exchange rate. Thus that midweek figure of 8.75 pesos (ebbing yesterday) should not be understood as dollars being busily exchanged at that figure — the same uncertainty which leads people on the demand side to accept such stratospherically high levels also prompts those actually with the dollars to hang onto them at all costs.

From the outset of this election year, the CFK administration’s economic policy seems to have adopted a Blanche Dubois attitude of depending on the kindness of strangers (in this case, Brazil and soy) and the fate of this strategy will probably be more decisive than whatever the government decides to do or not do in the next few days. But the main gift from abroad this year has been for the opposition (the election of Pope Francis) — neither Brazil (with negative momentum from a 2012 growth rate below one percent and accelerating inflation to keep in check) nor soy have been measuring up to expectations. Meanwhile, the soy sector lacks either the wish or the ability to play along with government hopes by pumping in the dollars to balance the frenzied printing of pesos. No wish because like everybody else, farmers would like to see where the greenback is heading — not just the blue dollar but also the official exchange rate should the CFK administration choose to imitate Venezuela in yet another aspect with a major devaluation (an example for Argentina but also a warning). And not the ability because less than two million tons of unsold soy remain from the old harvest while the new harvest is only starting to come in.

All the above basically serves as background for whatever Easter Calvary the government decides to inflict on the country in the next few days — watch this space for further analysis.