the long journey of Serge Massa as Minister of Economy at the center of international financial power which, for an indebted country with few possibilities of access to global credit, is the only creditor in a position to revalidate its titles, the International Monetary Fund.
The virtue that Massa wants to show is to act as a political umbrella to be able to fulfill what was promised. Or, at least, that the deviations will be within the foreseeable. The tireless negotiation, to obtain the necessary permission to turn towards some degree of orthodoxy, is the business card that he showed before his interlocutors in the United States. And before its local partners, which is the only key to obtain the oxygen (dollars) necessary to cushion the corrections.
The prices again. The INDEC He received it with predictable news: the August CPI was 7%, somewhat less than the July index (7.4%) and somewhat more than expected to show that the downward path had begun, in line with what was announced six months ago by the President in his declaration of war against inflation. The concern is well-founded: in the first eight months of the year, the index accumulated 56.4% and more than that projected by former Minister Guzmán for the entire year and 78.5% compared to August of the previous year. The annual projection remains a mystery: if nothing changed in the last four months (an average monthly inflation of 6.5%) 2022 would end with a 96% rise in retail prices. But if the optimism of the ruling party has a foothold, it could pierce the “floor” of 6% and end the year between 80% and 85% per year.
For the economist IDESA George Hill, this problem seemed to be the escape valve for not adjusting abruptly and the piece that the Government sacrificed to maintain a certain precarious balance in the external sector and also aligned with the “permissions” that the cristinista wing granted it… until the situation turned untenable. For this reason, in his opinion, the agreement with the IMF has already been breached and there is no going back. “The original goals are impossible to meet: it was said that the fiscal goal was 2.5% of GDP and the emission, 1%; but it was consigned in nominal values and when inflation accelerated, these goals could no longer be met. “, he stressed.
inflation plant. The fiscal goals were a central theme in the conversations with the Fund, but also those that constitute the sustainability test of the program that the Ministry of Economy aspires to fulfill in order to reach the final exam in December to which the entity’s staff will submit it. The erratic exchange rate policy maintained until now has been targeted, precisely because of its inefficiency and the number of distortions it introduced into the economy. The sequence was: change control, first; then the delay of the official exchange rate with the stocks on imports and finally, to avoid a devaluation correction, segmentation of the market starting with the one with the fastest reaction, soybeans. Precisely, this policy has a counterpart: The US$5,000 million that are expected to enter this month have their counterpart in the monetary issue to “buy” them and a loss for the Central Bank that sells at $140 what it buys at $200.
He is not the only one who thinks that the dollar-soybean panacea has the contraindication that aggravates the exchange rate pressure by generating pesos. for the teacher of UCEMA Federico Vacalebre, such a high gap cannot be sustained over time and the emergence of the soybean dollar is a way to start with the exchange rate split. “In addition, price references are lost in the economy, so devaluation and inflation are inevitable, a way of correcting relative prices, due to repressed inflation”analyze.
He believes that this mechanism only has a short-term objective: to raise money so that the central bank recompose your reserves, just in the weeks in which the import of energy falls and the drain of dollars to pay them. “The worrying thing is that soon everyone will come to ask for ‘their dollar’ differential and the exception will become the rule”, he anticipates. But there is still the adjustment in fiscal matters, the opposite of inflation and the exchange balance, because, he affirms that the only announcement that Massa could make was the rise in the interest rate.
for interest. Monetary tightening is the paradoxical consequence of good news: the increased influx of dollars, but also the way in which monetary expansion is made compatible with an anti-inflationary policy. In a study carried out by the international consulting firm McKinsey, Argentina is the country that increased its interest rate the most during the first semester: 14 points, almost triple that of Chile (5%), Brazil (4%) and more than double that of its Ghanaian escort (6%). And there is still a need to note the financial twist that the Central Bank gave him since Guzmán’s resignation, aggravated this week when they are already close to 110% annual effectiverunning behind inflation.
“The only thing that materialized from everything Massa announced was the rise in interest rates. But the correction is not exhausted in an isolated variable, it must be formulated in three axes: exchange, monetary and fiscal. Tburns or later it will happen because the maintenance cost of the current scheme is very high in the framework of a model that is also exhausted”, he emphasizes.
For his part, the economist specializing in international business Marcelo Elizondo He believes that once the energy import peak is over, the time will have come to rethink the entire system, since the current one only has one purpose of rebuilding the stock of reserves and showing the IMF a more acceptable picture. “I think you can’t live with patches and emergency systems. The economy needs a series of basic rules to generate stimuli and thus invest and produce because if the regime were good, there would be no room for exceptions“, summarizes.
Elizondo bets that the future involves adopting a market exchange rate supported by lasting macroeconomic balances, inspiring more confidence to eliminate rigidities to achieve fiscal and monetary balance. But the diagnosis of so many years of instability appears clearly: “Argentina does not generate dollars, it exports less than it could, it has a trade deficit in services, it does not receive foreign direct investment or genuine capital income and if anything comes in, it is only for the public sector”, sentence. The solution, then, does not lie in raising the pressure of the Government with more restrictions, but in founding the promised and expected development in international trade. “In prosperous countries, the greatest generation of regulations are contracts between private parties, not regulatory decisions of the authority,” he concludes.
The economic team has less than three months to advance on so many simultaneous fronts and the challenge is not to lose the order of priorities. But the priority in controlling inflation as a goal of economic policy requires creativity and a greater effort. The examination before the IMF and the internal consensus have already begun and may serve to order the policy or to confront it.
