May 21, 2022 8:58 pm

Basic guide to make the best financial decisions of production

There is a strong link between the dynamics of financial tools and the development of the macroeconomy. “The monetary issue, the fiscal deficit, inflation, the increase in rates and fuels and the low level of reserves, together with the permanent exchange rate tension and the still pending agreement with the IMF, generate a financial climate of doubtful sustainability in the medium term”, anticipates Martín Nava, specialist in financial issues at AZ-Group.

For example, interest rates on credits for the purchase of tractors and agricultural machinery are currently negative with respect to projected inflation and with respect to the evolution shown by the future dollar in the Rofex. In this sense, for the acquisition of tractors, seeders, sprayers and other implements, Banco Nación offers a credit line at a fixed annual rate of 27% in pesos, with a four-year term for repayment. In addition, some private entities have launched agreement lines with negative rates in pesos.

The other side of this favorable situation is the limited availability of equipment stocks ready to be picked up from dealers and the consequent delay in deliveries. Nevertheless, “whoever needs to renew their implements with a view to the next campaign should not delay investment decisions due to the risk of a possible change in the rate scenario in pesos, based on its relationship with the uncertain evolution of the macroeconomyNava advises.

The recommendation is particularly valid if one also considers the possibility that the devaluation of the peso will probably accelerate in the short term and that the producer’s payment currencies – grains and, to a lesser extent, meats – show prices above the historical average, with prospects that this condition will continue in the coming months.

don’t delay

Nava advises update bank folders, link to others if necessary, oil channels and not delay any investment decisions if the machinery will be needed for the next plantings. This also applies to the input purchase policy.

“Few days ago a rise in rates generated by the BCRA was recorded, in line with what was intended by the International Monetary Fund. Due to its transitory nature, it is likely that this measure will generate a rise in the cost of credits”, anticipates the consultant. That process could be triggered in the remainder of January and deepen even more in February-March. If it were to materialize, it would determine that lines for investment become less competitive, together with the rates of the Agro cards. “Most likely they will still be negative, but less convenient than they are right now”, estimates the analyst.

On the other hand, financial tools and the exchange rate are also linked and are related to what is mentioned in the first paragraphs. This link is a habitual reasoning in the decision-making of agricultural companies.

Negotiations with the International Monetary Fund are taking too long and could be finalized late in February or March. In the event that these efforts fail to anchor the expectations of economic agents or lower the country’s risk, or take effect for a short time, the exchange rate tension will probably continue, with the aggravating circumstance that, in February, a month in which the demand for pesos falls sharply, can see a concentration of money going around aimlessly. Those funds are likely they are going to put pressure on the exchange rate, forcing the devaluation dynamic or towards compulsive spending, generating more inflationary pressure”, advances Martin.

In this environment of uncertainty, financing tools move, whose conditions may be modified by the development of the aforementioned variables in the short and medium term. Under this scenario of probabilities, beyond how burdensome banking procedures may seem to companies, “financing for the acquisition of machinery or purchase of inputs is very convenient today; For this reason, it is highly recommended not to delay decisions and capitalize on financial opportunities, which have become decisive in recent campaigns to obtain good final results in agricultural companies.Nava concludes.

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