The curse that the Argentine economy has carried for half a century, at least, reappears like a monster with a hundred heads, in each variable that gets out of control. Although it goes through periods of apparent stability, the internal dynamic continues its course and accumulates pressures to explode later, as happened at the end of convertibility.
another step more. It is difficult to think that, with such antecedents, andn the midst of an arduous inflationary process that once again broke the psychological barrier of three figures this year (115% in the last annual projection) and everything indicates that at the harsh juncture of an electoral year that could define a change of direction, the rise even more. The latest REM survey that the Central Bank carries out among the main consulting firms in the market, shows a projected CPI rise of 149% for 2023.
Precisely, given the continuous red in Treasury expenses due to the collapse of economic activity and tax collection during the pandemic, The financing was based on the monetary issue and, as of November 2020, the placement of internal debt denominated in pesos.. At that time, the slow exit from the COVID paralysis led to a currency run as a result of the excess pesos in the market that led the dollar to close to $195 (which would be $885 today). Anticipating what it would generate, Guzmán’s economic team chose to appease the issuance and increase the internal debt in pesos. The option of borrowing in dollars was not enabled because Argentina had not yet come out of its irregular situation with private creditors (the bondholders) and with international organizations (basically, with the International Monetary Fund). Anyway, andThese debt reschedulings were lengthening payment terms or even, in the case of the IMF, since it was not possible to remove capital, disbursements were foreseen to make payment of the planned quotas. That is, an accounting entry so that you do not have to pay but that would increase the amount involved. According to the study of the consultancy eco go “Inflation was not born from a cabbage”, from 2003 to date, The Central Bank used US$ 269,000 million to finance the State. This represents almost half of the GDP and the total amount of three years of exports.
eternal debt. The reluctance to make a fiscal adjustment led to an increase in the use of alternative sources of financing: monetary issue, external debt (in foreign currency), internal debt (in pesos) or the deferral of payment of obligations, such as pension debt or with suppliers. which was also attended as the other doors were closing.
The combined tax pressure (from national, provincial and municipal jurisdictions) reached 34% of GDPI according to the IMF methodology. It is not much compared to other OECD countries such as Sweden (49%), Italy (48%) or Germany (46%), but it is insufficient to finance consolidated public spending that reached 45% in 2022, according to estimates by researcher Roberto Vassolo (IAE) on official data. That difference is what is persistently covered with debt, monetary issue, and postponement of payments. And to aggravate the picture, with 40% of the economy in the dark, the tax pressure is even much greater on the segments and people who are in the formal sector.
The danger of an inflationary derailment encouraged financing through the placement of bills by the Central Bank. At the beginning of June, the mass of interest-bearing liabilities placed by the monetary entity exceeded the $15 trillion barrier, 167% more than a year ago (against 115% inflation), which shows the indebtedness in terms real. This is equivalent to 13% of GDP, which is also a peak. The monetary issue to finance the State is estimated at $3.3 trillion in the first five months of the year, which is equivalent to another 2 points of GDP, when in the same period of the previous year it consumed 0.8% of GDP. The difference, among others, is that each “soybean dollar” plan (buy dollars at one price and sell them at a lower price) and with bond repurchase operations (pesos are delivered to acquire dollarized bonds that are later used in the market to step on the value of the “MEP dollar” or the one that arises from the purchase and sale of titles), a monetary and fiscal mismatch is generated.
fattening. The volume is such that it steps on a zone of permanent risk, volatilized with the shortage of dollars exacerbated by the drought this year. Each month, financial monitoring forces the bills to be tendered, establishing a cut-off rate: if it is too high, it establishes a floor for the rest of the financial activity, absorbs pesos, discourages economic activity, but deflates the demand for dollars. If it is very low, the available funds fly towards the US banknote, fueling expectations of devaluation (of the official exchange rate) as the gap widens and rising inflation. That “short blanket” is what Minister Massa’s team faces when they have to manage the shortage. While negotiating on the external front to get SDRs (with the IMF), yuan (China) or real (Brazil), more or less perfect substitutes for dollars that did not rain; must choose between continuing to raise the interest rate and enlarging the “snowball” of domestic debt instruments, validate a more accelerated devaluation (the official exchange rate is still behind the CPI) or the utopia of restricting current expenses, right in the middle of the campaign and being himself a potential candidate. For Camilo Tiscorniadirector of C&T Economic Advisors, the “roll over” (renewal) of the debt is relevant to form devaluation expectations and future inflation. “The Leliqs help to contain a current monetary issue, taking pressure off financial indicators such as the exchange rate, but the expectation of future inflation feeds you“, Explain.
Federico VacalebreProfessor of UCEMAhighlights that to the extent that the debt in pesos cannot be sustained and people go looking for those deposits that they have in pesos, the central bank it must go out and issue those pesos, deposited in the banks and that these lend to the BCRA.
This means that, in this scenario, everything that can be kicked off beyond December 10 will be welcome. “It is essential that both the small and the large depositor, be it a company or a person, do not undo their position because that would obviously trigger inflation and, of course, the exchange rate”, concludes Vacalebre. It is the heart of the “Arrival plan” and the objective, which seemed trivial, became ambitious: to be able to reach the transition zone with an economy that retains control.
You may also like
by Tristán Rodríguez Loredo
