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Same Negative ARS Trajectory Post Program Disbursement: Goldman Sachs

ARGENTINA
  • Following the unlocking of $3.8B disbursement for Argentina, Goldman Sachs think that the implications for the currency are limited. Policy makers maintain FX, capital, and trade controls that keep the official exchange rate well apart from a market equilibrium price.
  • In fact, there is little uncertainty about the current overvaluation of the Peso at the official exchange rate: the REER has appreciated more than 50% since August 2019 (when the USD/ARS rate transitioned to a crawling peg regime and parallel market spreads started to re-emerge) and the trade balance continues to deteriorate, despite the supportive terms of trade dynamics.
  • Overall, with 12-month ahead inflation expectations currently at 94% Y/y, the recent slope of the USD/ARS crawling peg (~100% annualised) appears just sufficient to prevent current (unsustainable) valuations from deteriorating further. Going forward, the path of the official exchange rate will be a function of policy makers’ preferences in the near term, especially as we get closer to the 2023 elections.
  • However, risks around their USD/ARS official rate forecast of 260 in 12 months remain firmly skewed to the upside.
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