November 1, 2014
Credit card dollar is higher than ‘blue’
for the Herald
For the first time yesterday, the black market or so-called “blue” dollar traded cheaper at 10.55 pesos than the rate charged for credit card transactions in foreign currencies, commonly known as the credit-card dollar.
The 70-cent drop in the blue dollar brought it 10 cents below the credit-card dollar, which is the official dollar exchange rate plus a 35-percent refundable surcharge for all foreign-currency transactions, closing at 10.65 pesos yesterday.
With the official dollar steady under the eight peso-mark for a month now, and ending yesterday fractionally higher at 7.89 pesos, Central Bank Governor Juan Carlos Fábrega has seemingly succeeded in his goal of shortening the gap between the two rates — reduced to 33.7 percent yesterday. The corresponding effect on reserves has yet to be seen, although its decline has slowed down this month.
Since Fábrega was appointed as Mercedes Marcó del Pont’s replacement in November, he has championed the notion of squeezing the exchange-rate gap in order to plug the reserves hole and curb their decline, with investor confidence palpably affected by the highest annual drop in the government’s foreign bank account since 2001. Reserves plunged US$12.7 billion last year.
January saw another US$2.5 billion drop, but reserves only went down a by comparison meager US$83 million last month, pointing to significant results for Fábrega. Reserves rose US$6 million yesterday, closing at US$27.665 billion.
The Herald consulted economists on the potential relevance of a four-day weekend in a drop of such scale for the blue rate, but there was consensus that development was largely due to the general state of economic affairs, that is, the Central Bank having raised interest rates, which has vacuumed up excess pesos from the economy, and maintaining strong intervention on currency following the steep and sudden 22 percent devaluation in January.
Although the parallel dollar is seen as more under control than in the past, the rate remains volatile.
“Higher (interest) rates, at about 30 percent, along with the disappearance of expectations of devaluation in the short term, that is within two or three months, means that that it has become very attractive to place pesos” in fixed-term deposits and other credit mechanisms,” La Gran MaKro economist Agustín D’Attellis told the Herald.
D’Attelis added that the depreciation of the peso in January abruptly halted speculative behaviour by diverse sectors of the economy.
In line with this trend, a black market trader told private news agency DyN that “the scarcity of pesos (in the market) made transactions for the parallel rate sink.”
Continuing a macroeconomic vein of explanation, D’Attellis said that demand for the blue dollar has sharply waned with the opening of a formal channel to purchase dollars for savings at the official rate. The amount of savers on the blue market was already comparatively quite small, he adds, so — for those who earn more than 7,200 pesos a month — exchanging up to 20 percent of their monthly wages at the official rate (plus the 20 percent charged if people choose to withdraw the cash there and then) logically lessened demand for the illicit rate, influencing yesterday’s drop.
The “savings” dollar, with the 20 percent extra included, closed yesterday at 9.47 pesos.
“The drop is explained by the favourable macroeconomic situation of the country, which is perceived on the market and known by traders,” UBA economist Mariano Kestelboim agreed.
The magnitude of the 70-cent decrease “does not respond to anything in particular,” D’Attellis argues, adding that the seemingly progressing process of reducing the exchange gap simply has days of quicker acceleration.
“What we have to follow closely is what will happen after June with a potential decrease in export settlement,” he concluded.
Still a problem
Regarding the impact of the carnival holidays on Monday and Tuesday, IDESA economist Jorge Colina told the Herald that “the people who move the parallel dollar are large speculators, not tourists.”
Nonetheless, Colina argued that “the gap between exchange rates is still high, and the export sector is still discouraged from settling” when more pesos are available on the black market.
“The blue rate remains relatively under control due to the transitory measures implemented, such as the demand for banks to reduce the amount of capital held in dollars, halting imports and taxing travel (abroad),” Colina continued.