Commentary
The Argentina saga continues, though there seems to be some evidence of stabilisation.
Inflation continues at about 50% per annum.
It seems to be reasonably possible to get hard currency to pay for imports from third parties, as long as the import has been properly registered and approved, is from a third party, and is more recent than March 2021.
On the other hand, it is very difficult to get approval for intercompany remittances, even if these are for goods. Old outstanding balances are basically frozen, with very little progress on remitting them out.
Currency hedging is difficult to obtain, and prohibitively expensive. Most participants have given up trying to hedge peso/dollar exposures.
Most people are seeing significant build ups of peso cash. It is difficult to earn a decent return on this cash – maximum interest paid tends to be between 20% and 30%, i.e., a net loss of value of 20% after inflation. Some foreign banks, such as Citi, will not accept peso deposits.
This situation can lead to significant P&L exposure, as companies record FX losses on their dollar denominated liabilities – especially the intercompany ones.
Most participants continue to do business in Argentina, because it is viewed as a strategic market. Also, many have to support international customers, who do business there.
As always, our members are adopting a series of interesting and innovative measures to cope with this situation. There is a lot of detail below – the quick summary is:...please sign in to continue reading
Please sign or set up a free registration to read the rest of this commentary and get access to all CXC commentaries together with occasional free reports. (if you receive our updates, use your email to re-set your password)
