What is CCL? Why wait to make transfers?

[Quilombo]

I am not an expert but I know some of you are. I have seen good predictions here. Well, I have to make a big WU transfer, should I go ahead now it's 253 or should I wait until Friday? Do you predict it to go up?

The recommendation is the following from me:

- Send only what you need, when you need it
- Finance anything you can with interest free cuotas
- For large purchases, wait for spikes/adjustments like yesterday's
- Expect the unexpected: past performance is not indicative of future results

As part of the accords with the IMF/general lack of funds the government basically has let the CCL float, which WU/MG uses as an index.
If you remember last year, the blue was for a long time higher than the CCL because of interventions to maintain an artificially low value.
This has since come to an end, and the CCL now serves as a indicator of confidence, and as a relief valve for people or companies needing
to access dollars legally (unlike the blue) without restrictions.

Why do I mention this? When the government makes decisions that spook the market, such as extending financing terms for dollar payments, or there being general macroeconomic ineptitude (such as the 28th largest oil producer in the world, Argentina, having diesel shortages, or inching towards 80% inflation) this causes jumps in the CCL, and in turn, the WU exchange rate. This is how you can factor when to send larger amounts of money.

The best way to know when you should send money following a jump is to follow it, and wait for the WU rate to be updated to reflect it. For example, the CCL was up Tuesday and Wednesday to 250:1, but WU didn't update the rate from $223 until yesterday when it hit $253. Take a look at the CCL rate, then the WU rate. As long as the WU rate is better, or at least not more than a couple of pesos less than the CCL, you're fine to send money. If there's a wide gap like earlier this week, wait.

Will the jump continue? IMO, no, I think the market has finally adjusted the out of control inflation and poor macro economic management/restrictions that was causing the CCL to be artificially low for a while, even as inflation kept going up. If you index the last time the dollar was traded freely in Argentina, August 2019, to inflation, the official exchange rate would be 193 pesos per dollar, which was where the blue was in May. The blue being at 238 now, and CCL 255 is reflective of a decrease in confidence, increased cepo on accessing dollars (even if the government calls it something else), and inflation projections by the BCRA's independent survey of economics of ~75% to 80% for YTD, and pricing this all in from a floor of an inflation adjusted blue of 193.

Long story short: I sent my money for some purchases I was waiting to make, judge for yourself considering the information we have at our disposal.

 

[hotfuzz]

The recommendation is the following from me:

- Send only what you need, when you need it
- Finance anything you can with interest free cuotas
- For large purchases, wait for spikes/adjustments like yesterday's
- Expect the unexpected: past performance is not indicative of future results

As part of the accords with the IMF/general lack of funds the government basically has let the CCL float, which WU/MG uses as an index.
If you remember last year, the blue was for a long time higher than the CCL because of interventions to maintain an artificially low value.
This has since come to an end, and the CCL now serves as a indicator of confidence, and as a relief valve for people or companies needing
to access dollars legally (unlike the blue) without restrictions.

Why do I mention this? When the government makes decisions that spook the market, such as extending financing terms for dollar payments, or there being general macroeconomic ineptitude (such as the 28th largest oil producer in the world, Argentina, having diesel shortages, or inching towards 80% inflation) this causes jumps in the CCL, and in turn, the WU exchange rate. This is how you can factor when to send larger amounts of money.

The best way to know when you should send money following a jump is to follow it, and wait for the WU rate to be updated to reflect it. For example, the CCL was up Tuesday and Wednesday to 250:1, but WU didn't update the rate from $223 until yesterday when it hit $253. Take a look at the CCL rate, then the WU rate. As long as the WU rate is better, or at least not more than a couple of pesos less than the CCL, you're fine to send money. If there's a wide gap like earlier this week, wait.

Will the jump continue? IMO, no, I think the market has finally adjusted the out of control inflation and poor macro economic management/restrictions that was causing the CCL to be artificially low for a while, even as inflation kept going up. If you index the last time the dollar was traded freely in Argentina, August 2019, to inflation, the official exchange rate would be 193 pesos per dollar, which was where the blue was in May. The blue being at 238 now, and CCL 255 is reflective of a decrease in confidence, increased cepo on accessing dollars (even if the government calls it something else), and inflation projections by the BCRA's independent survey of economics of ~75% to 80% for YTD, and pricing this all in from a floor of an inflation adjusted blue of 193.

Long story short: I sent my money for some purchases I was waiting to make, judge for yourself considering the information we have at our disposal.

Great explanation on the recent jump.

It seems that the CCL is now back in line with inflation. Do you see a more gradual increase now? Or too hard to call given the volatility happening around the globe.

 

[Redpossum]

https://www.cronista.com/MercadosOnline/moneda.html?id=ARSB is showing the CCL at 254, with the Blue dollar at 235/.238

Remember when we thought 220 was exciting?

**edit**

CCL just dropped to 251.99 while I was watching. This volatility is crazy scary.

 

[Quilombo]

Great explanation on the recent jump.

It seems that the CCL is now back in line with inflation. Do you see a more gradual increase now? Or too hard to call given the volatility happening around the globe.

I'm not an economist and don't claim to be one, but nobody has ever lost money betting against the peso longterm.

I personally think the increases will be more gradual now, hopefully continuing in line at very least with the crawling peg the BCRA is foolishly trying to maintain, i.e. if the official goes 130 to 132 then the CCL goes 255 to 257. I call it foolish because they're cutting off their nose to spite their face; since they continue to refuse to let a correction happen whether via a large devaluation, or a crawling peg that matches inflation they only incentivize everyone from middle class Argentines trying to save something to businesses to importers/exporters to tourists, etc. to never let a single Benjamin see the inside of the reserves vault; after all, nobody, not even the BCRA believes the dollar is worth $130 pesos, that's why the Blue and CCL exists in the first place, and with a further cepo announced yesterday (you can no longer finance purchases in cuotas made via websites such as Tiendamia that use the puerta a puerta import scheme) just proves there is no economic plan like Alberto said back in 2020 as dollars continue to flow in one direction.

All this is to say that 1 of 2 things will happen in my opinion:

- The CCL surge was the result of kicking the can down the road and there was finally nowhere else to kick it/increased cepos, and now it will rise in concert with the official via the crawling peg
- The self defeating cycle of an artificially low official exchange rate of 130:1 gets worse when paired with increased cepos and global volatility: exporters lack imported components, more businesses close/shutdown for weeks/greater scarcity of input goods, more businesses under export/over import out of need or to take advantage of the system, the BCRA reserves tank further as the field decreases output due to winter/diesel shortage/strikes against the government, more people and businesses turn to the CCL after being locked out of the Byzantine Aduana import/export system, and all this combined pushes the CCL to at the very least keep up with inflation (i.e. higher than the crawling peg), or, spike with each bad news story (inflation data for the past month, new cepo, new export vs. import data, IMF goals, etc.)

I'm still inclined to believe that scenario one is most likely, or, at the very most, the CCL keeps up with inflation. That being said, the situation is getting worse day by day from a macro prospective domestically, ignoring the coming recession the Fed is hell bent on imposing, so the only thing I can say with confidence is to ignore anyone who says they know what exactly is going to happen next.

 

[Rich One]

Great explanation on the recent jump.

It seems that the CCL is now back in line with inflation. Do you see a more gradual increase now? Or too hard to call given the volatility happening around the globe.

The CCL must reach 260 to be somehow in line with inflation..! will soon be there.?

 

[dsp27]

The CCL must reach 260 to be somehow in line with inflation..! will soon be there.?

CCL has little to do with inflation. The exchange rates in ARG are so distorted that no one really knows what the "correct" value of the peso is.

 

[lunar]

CCL has little to do with inflation.

It has, in a sense. Say, a company like Tenaris is traded on both NYSE and BCBA. CCL is roughly a ratio of the market price of one share in pesos here to the price of one share in dollars there. If the government prints pesos, people are ready to pay more pesos for one TS share and CCL goes up.

It is a measure of decreasing purchasing power of money, just it is not based on a basket of goods and services.

 

[dsp27]

It has, in a sense. Say, a company like Tenaris is traded on both NYSE and BCBA. CCL is roughly a ratio of the market price of one share in pesos here to the price of one share in dollars there. If the government prints pesos, people are ready to pay more pesos for one TS share and CCL goes up.

It is a measure of decreasing purchasing power of money, just it is not based on a basket of goods and services.

This is a very loose analogy. You need to hold all other factors in the equation constant for this idea to hold. The market valuation of Tenaris is not a constant...it's based on several factors (earnings, market conditions, expectations, etc etc.). At the same time the CCL market is also used to legally take money out of Argentina, so when there is a sense of things hitting the fan there is panic rally. Also inflation once imbedded is often to a great extend based on "expectation" and speculative price hikes. Yes, the BCRA is printing cash to fund the deficit but there is also an imbedded inflationary inertia. This is actually the fear the Fed has in the US, that inflation would become "set". They are so scared that they are willing to throw the economy into a recession.

 

[lunar]

The market valuation of Tenaris is not a constant...it's based on several factors (earnings, market conditions, expectations, etc etc.).

It does not matter. You just value the same thing (one share of Tenaris) here and there in different currencies. We are talking about the ratio. If there is a panic rally, expectations, inertia, whatever - internal complexity does not matter, since it is absolutely the same thing.

 

[dsp27]

It does not matter. You just value the same thing (one share of Tenaris) here and there in different currencies. We are talking about the ratio. If there is a panic rally, expectations, inertia, whatever - internal complexity does not matter, since it is absolutely the same thing.

But that s assuming ccl is a free market and it s not it s heavily regulated and distorted.