Until now, the economy minister-presidential candidate combination with chances had worked in the region on few occasions and as a result of a successful stabilization and growth process. The most famous was Fernando Henrique Cardoso that appeased the very high inflation in Brazil and led it on a path of moderate growth, but without rising prices. That earned him the presidential candidacy and re-election.
The ambition
Sergio Massa, on the other hand, arrived at the Palacio de Hacienda as a last resort amid the “helicopter noise” as the former Minister of Housing confessed some time later. sergio ferraresi. The implicit promise to calm the markets, lower the exchange rate tension and gradually lower inflation was fulfilled to gain the necessary space to unify the economic management (ministries were eliminated and there was only one voice in this field) and generate a protective umbrella against the critics of the tougher K sector. But it was one thing to stop the ball and another to generate play.
There, in an interview at the end of November with Jorge Fontevecchia He expressed that his goal was to reach the second quarter of that year (which ended this Friday) with inflation below between 3% and 4% per month. Without mentioning it, the other side of this challenge was to achieve it without affecting economic activity or employment. But achieving it also increased the macroeconomic imbalance that Argentina has been dragging for several months. “Forcing activity and employment had a cost that was reflected in the collapse of BCRA reserves. Since the beginning of the year, gross reserves have fallen by US$13,144 million, going from US$44,597 million to US$31,453 million.”is the conclusion of the latest report from the Eco Go consultancy, which, in addition to monitoring prices, carries out a permanent investigation of the interaction of electoral dynamics with macro variables.
From the beginning, the urgency was that the great thermometer of the Argentine crisis, the dollar, did not escape. In reality, the implementation of the exchange policy since 2019 and the successive adjustments have transformed it into a control panel, in which the “classic” free dollar is carefully observed, but the financial dollar (MEP or cash with settlement) is added. , the “official”, the various types of derivatives according to tax withholding or penalty and the consequent exchange gap.
And two new obsessions: the trade balance for each month and the level of net international reserves. It is not fortuitous: the historical record export income of 2022 has already vanished, a victim of the arbitrary policy that setting the exchange rate at a value below the market value encouraged the advancement of imports and did not boost exports. Conclusion: more clamps on imports, problems in the supply chain for the industry and the risky decision to continue operating with negative reserves.
“Currently, the Net Reserves (excluding SDRs -the unit of account of the IMF-) are at historical lows: they are negative in close to US$2.200 million” anticipated the latest report from Ecolatina. In this scenario, he adds, the Government had to cancel maturities with the IMF for US$2.7 billion this week (on June 21 and 22) but the authorities decided to postpone said payments until the end of the month (a movement allowed under the IMF regulations) waiting some disbursement that would correspond to the fulfillment of the goals of the first quarter. In the books, an income, in the reserve account, nothing.
Precisely this mismatch ended up putting a brake on the inflationary deceleration and as of January a floor of 6% per month was already established to go to 7% as of March. With the first semester closed, private estimates for June are enough to project inflation of 135% for all of 2023.
what’s coming
The traditional gap between what is promised in the campaign and the mirror of what is already being managed is an obvious vulnerable side for Massa, but it can also become the point to leverage his campaign. “Massa’s presence among the alternatives ensures a smoother transition until October. But, in addition, in this new scenario, and regardless of who wins, 2024 could be a turning point for Argentina because the available alternatives aim to normalize the economy,” he predicts. javier timerman, managing partner of Adcap. Along these lines, he suggests that It will be interesting to see if the candidate Massa begins to deploy measures that require some kind of continuity in 2024. “Now the agreement with the Fund could provide some fresh financing and talk is already beginning of a new phase of the soybean dollar,” judgment.
for the economist Maria Castiglioniconsulting partner C&T Economic Advisors The situation is unprecedented because it is clear that there is a Minister of Economy who is the only one who really governs (with the permission of Cristina Kirchner something behind) but in the middle of a difficult panorama. “These are difficult months to renew maturities, the relationship with the IMF and exhausted reserves, which although the China swap is used is not enough for everything”, he emphasizes. The challenge for the Massa-candidate, in his opinion, will then be that of “show some immediate result, financing what is ahead and for that you must be careful and resort to your creativity”, he concludes.
The mission. To a certain extent, Castiglioni points out that since the current Minister of Economy also accumulated imbalances and distortions to minimize the political effect (through controlled prices, the freezing of rates, the exchange delay and the stocks) he has few tools left to use without removing the precarious macroeconomic balance from the axis. “The only thing that is adjusting is the income of retirees and the AUH that is partially offset by bonuses. But the other expenses are increasing (public salaries and transfers to pcias). So until I STEP I think the objective will be to stay afloat and then they will see ”, he concludes.
The consultant INVEQ stresses that the aforementioned economic imbalances persist and worsened in May (the last month with complete figures). “On the one hand, the primary result was again in deficit and thus the fiscal red deepens, despite the adjustment that the Government has already been making and the trade balance presented the largest deficit in the last five years, given the deterioration of exports affected by the drought”, he highlights. This implies that the administration says goodbye -again- to the fiscal target agreed upon last year with the IMF.
The electoral dynamics will be marking the agenda of the candidate Massa, but the monitoring of the most sensitive variables to avoid a derailment will have his other self busy, the one who lives on the fifth floor of the Ministry of Economy. Meanwhile, there are two figures that speak eloquently about the crisis. Persistent inflation in the last decade has been eroding the demand for money: the IERAL calculated it by the end of 2022 at 3% of GDP, a value that is less than half the modest 6.5% of 2015. A key fact to understand why the issue of dollarization was easily installed in the campaign. But also, behind the excuses and scapegoats, it is clear that all the turbulence on the international scene is not enough to explain the loss of ground of the Argentine economy compared to its neighbors: 5% drop compared to 2017 while Brazil and Chile rose 11% and 15% respectively. A major challenge to pure adrenaline.
