Argentina's financial market is steering into a storm as the rapid growth of Lediv (Letras Internas del Banco Central de la República Argentina in dollars, liquidated in pesos at the BCRA's Reference Exchange Rate) sets an unprecedented record with a stock of US$ 5.119 billion, nearly US$ 2 billion increase in a week before the runoff election. This economic turbulence, according to 1816 Consulting, is poised to challenge Javier Milei's future exchange policy, given the US$ 50 billion heap of Dual and dollar-linked bonds.
The Lediv Challenge
1816 Consulting, an agency linked to the financial sector, warns that the upcoming economic scenario might necessitate an instant print of AR$ 4.1 trillion if the official dollar rate touches AR$ 800, as predicted by December futures. However, the consultancy argues that the Lediv's movement doesn't stem from a weakness in parallel dollars, as the recent decreases in CCL, MEP, and blue dollar rates indicate. Rather, governmental measures permitting 50% of exports to be settled in parallel FX markets instead of Lediv offerings could be the driver behind the peso's strength.
Eligibility and Purchase of Lediv
The BCRA has narrowed down the list of eligible Lediv investors to banks with dollar-linked deposits, energy companies that have increased production, and SME importers. The zero-rate purchase of Lediv, which can be redeemed anytime, provides a more affordable exchange hedge compared to dollar-linked bonds or futures.
The absence of the Central Bank from the December futures contract, with an open interest of US$ 600 million, is noteworthy. It remains a question whether it will roll over the almost US$ 5.5 billion from the November contract in the upcoming days. These financial movements and the potential challenges they pose to Milei's future exchange policy reflect the dynamic nature of Argentina's financial market.