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July 19, 2021

The Week at a Glance

Argentina: The “Cepo” Reloaded

BY Alejandro Giacoia, Andrés Borenstein, Miguel A. Kiguel, Lorena Giorgio, Isaías Marini

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Last weekend the Central Bank and the Securities Commission tightened exchange restrictions, putting more limits on the operation with the most traded sovereign bonds, which are usually used by firms to buy dollars. In addition, it was sought to close some mechanisms that allowed conglomerate to access to the Blue-Chip Swap market through subsidiaries companies and other typical arbitrations of heavily intervened markets.

Inflation Does Not Ease

Inflation in June was somewhat lower than in May, but it was higher than we expected in Econviews. In the case of the headline, compared to an expectation of 3.0%, the observed data was 3.17%. It was not a very big difference. But core inflation did surprise: with 3.61%, it exceeded both market expectations and our own (3.2%). The average of the last 3 months reached an annualized 52% for the headline and 58% for the nucleus.

Summer of ‘22: Exchange Rate, Utility Prices and Inflation

There is consensus among economic and financial analysts that, until November 14, the day on which the final legislative elections will be held, both the official exchange rate and utility prices will be used as anchors to contain the inflation. However, once the electoral “season” concludes, the beginning of the summer will probably bring a reset of these variables that will allow the recovery of FX competitiveness and reduce the pressure that the energy subsidies expenditures exert on fiscal accounts.


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