If the economic team headed by Sergio Massa that the challenge of 2023 was for the economy to be able to withstand the demands of an election year (with a presidential race included) and at the same time provide the support of having under control the key variables that move the needle at election time: prices, the dollar and purchasing power.
Focus on the CPI. The main one, but not exclusive, is inflation, the great popular thermometer that measures the short-term success or failure of a political administration since this phenomenon was reborn from its ashes, a little less than two decades ago, and intensified in recent years. ten years. Once Massa’s management managed to slow down the price index from its dangerous 7% per month, the purpose announced at the launch of the Fair Prices program was to gradually lower it to make it converge to the goal of 4% per month and even dream of an idyllic 3%.
The January number would be showing that the 5% monthly floor (80% annualized) is still in force, but with much more pressure. The first private estimates show this. The CPI that elaborates the S&T consultant gave 6.4%, two tenths more than what December gave them. But what is striking is that the Food and Beverages category was below: 5.2%. “Until the elections we see something similar to the last months and a jump in December with the change of government. There is the risk that things get out of hand and there will be a devaluation beforehand with more inflation”, comments its director, Camilo Tiscornia.
For its part, the consultant EcoGo spread that he“Core inflation” gave 5.4% but the factor of regulated prices has already returned 7.4% due to ongoing updates and that will continue for the rest of the year. In his latest weekly report, he warns that the rise in the price of live cattle of more than 30% from the minimum, added to the strong restriction on access to the official exchange rate, even for companies that agreed with the Government, the moderation in their prices, began to show cracks.
Always present. Another variable, tied to the electoral climate, is the value of the dollar. Actually, to speak more precisely, its various quotes. Although the number that wins the battle of “cultural self-construction” is still the “blue”, the distance between the financial exchange rates (the stock dollar or cash with liquidation) and the official one cannot fall below 100%. And this fact also threatens to alter the sense of control that you are trying to achieve.
The recognition that the shortage of reserves was not something temporary triggered the series of initiatives with which Massa even came to surprise. Burning his own script and even contradicting himself in a few days, the implementation of the Soy Program II came with the third edition. A swap with China was also agreed, IDB funds were released before its president was fired, a large balloon of the common single currency with Brazil was launched (which left as a balance something more concrete of a loan from the neighboring giant so as not to cut exports of Brazilian companies to Argentina). The problem, revealed with the various clamps on imports and financial for the purchase of dollars, worsened with the combination of lower export prices for 2023 and the drought. Dante Romano, FyO’s Market Manager, estimates that the final decline in exportable balances will be between US$8,000 and US$10,000 million if the situation does not worsen. Eco Go calculates that, in total, this year there will be less foreign exchange income in the order of US$22,000 million, compared to the numbers of 2022.
This situation brings with it two direct consequences in the domestic market: a sharp slowdown in the level of activity (with almost zero growth for the fourth quarter of last year) due to the lack of inputs and the monetary effects of the export stimulation plans, with increases in interest rates.
roof in sight. This also led to a lower level of real tax collection: in January it fell 1.4% with respect to year-on-year inflation. The combination of a fiscal situation that has not yet been able to consolidate and the need to continue financing the remunerated liabilities of the central bankset a ceiling on internal financing as an easy way out. Jorge Vasconceloschief economist at IERAL He referred to the dilemma that the Government must deal with in this electoral year. He titled the latest report from him: “Debt or inflation, the alternatives the options of 2023”. He points out that after the January debt maturities and placements, lo What remains of debt maturities in pesos is a figure equivalent to 10.5% of GDP, of which the Central Bank and different public organizations would have 6%: in private hands there would be 4.5% of GDP. This is the number that, if the monthly red is not increased, must be refinanced periodically at the risk of producing a financial run that would make the dollar shoot up and induce a “preventive” price rise.
“The issue is that the fiscal deficit must also be taken into account, and the fact that direct financing from the Central to the Treasury is limited to 0.6% of GDP in 2023; That is why it is said that, approximately, for every $100 of debt that matures, $130 must be placed. The difference has to do with the “fresh money” that is needed to cover the deficit”, explains Vasconcelos. If the private demand for bonds does not appear, then the BCRA would have to continue buying Treasury debt in the domestic capital market with the issuance of pesos. “To this emission we must add the emission bonus for the Soybean dollar, which in 2022 was equivalent to 0.6% of GDP and in 2023 points to 1% or perhaps something more “underline.
The job. The projection of this panorama plus the demands that appear in the final stretch prior to the elections (another “Platita plan”) could overheat the gears of a machinery that has no other objective than to “arrive”. The monitoring that private parties do of these variables encourages them to take positions in advance. A growing gap, for example, would herald an acceleration of mini-devaluations or an abrupt jump in the official exchange rate.. But that would also trigger inflation, something that you want to avoid at all costs, because wage erosion is very expensive in an odd year.
A recent report on the impact on consultant salaries ecolatin He points out that a key element for nominal ordering is parity. “It is difficult to face a significant moderation of inflation if wages remain ‘stuck’ to past inflation… the ruling party also wants negotiations to be signed at a rate of 60%, with a semi-annual agreement of 30% being a strategy to achieve acceptance of the unions and start the path”, he highlights. For a part of the electorate, this will is alien to their reality: only a third of the economically active population has formal private employment. But union leaders have already seen governments go by and surfed elections: their interest goes beyond the situation between the ruling party and the opposition. Trigger clauses, lump sums and financial calculations will proliferate to maximize what they know reality will allow them. A game in which they have many flight hours.
