Emmanuel Álvarez Agis explained how the Central Bank uses the "rulo" to buy dollars from money laundering

When different economists analyze the course of the economic program of Javier Milei's Government, there is a coincidence in the diagnosis : the lack of dollars is the main obstacle that must be managed so that the disinflation process occurs and the exchange rate can be removed without a jump in the exchange rate. Through negotiations with the Fund, the economic team aims to cover this deficit without generating major noise in the economy.

For economist Emmanuel Alvarez Agis, the anchoring scheme proposed by the Government is based on a strong dependence on a carry trade that keeps the exchange rate gap aligned and therefore the rest of the financial variables. "For the plan to work there has to be a carry trade : that is why the crawling peg drops to 1% and the rate only 300 basis points; because if you ask the exporter to hurry up, but at the same time you reduce the carry, it may happen that they do not hurry up," he said in a talk for the clients of the Puente investment bank.

At the same time, Agis added: "Second, the exchange rate gap must be contained, because the producer will not sell the soybeans if the gap goes from 12% to 35%, so until June the Government has to be putting a ceiling on the cash settlement every time it heats up. And that is very important, because otherwise, on the other side, the Central Bank will not be able to buy reserves."

In this presentation, the director of the consulting firm PXQ explained how the "loop" works, which allowed the Central Bank to make almost US$ 3 billion since the beginning of the year due to its interventions in the foreign exchange market.

"We have been able to transform the laundered dollars into private debt," he said and explained: "When a money launderer puts US$ 100 in the bank, the Central Bank does not see a dollar, because those dollars are payable on the same day, paying the 5% penalty. Now, the banks suddenly say: I am full of dollars and I am not making them work. They begin to offer companies to go into debt in dollars."

"Companies say, well, I'm worried about taking two dollars, but let's see, is there a carry trade ? Yes. So , if I take on a debt in pesos, I pay an enormous rate. I prefer to go into debt in dollars. When the company issues a debt in dollars, or asks a bank for a loan in dollars, when that debt matures, it has the obligation to sell those dollars to the Central Bank. So, in this way, a laundered dollar becomes a reserve of the Central Bank," he added.

Agis estimated that this "loop" meant an income of US$ 6,000 million for the Central Bank in the last few months. However, he calculated that the Government will have a "gap" of US$ 14,000 million this year . "That is why the Government says that it will ask the IMF for between US$ 12,000 and US$ 14,000 million ," he said.

At this point he warned: "For the program to close, the wheel that allows companies to borrow dollars for the Central Bank to buy them must continue to turn. There is an obstacle there, which is that the regulations, the convertibility, do not allow me to lend dollars to a legal entity that does not generate dollars."

In reference to the latest regulation of the Central Bank's board of directors that will allow banks to "relax" the requirements for granting loans in dollars, he said: "Then all these rumors start to appear that they are going to allow mortgage loans in dollars, that they are going to allow collateral in dollars, that they are going to allow personal loans in dollars. Well, I would recommend that we don't make any mistakes with this and that we go a little slower."