At the time of choosing the characters of the year In its traditional December cover, Time magazine did not always highlight the winner but often the current villain who had monopolized the attention during the past year. This is what happened with an old acquaintance of Argentine economic life: inflation. If the projections of a CPI increase of more than 22% for this month are confirmed, inflation in 2023 will have been at least 200%, breaking the record set in 1990 (1,343%), the last one prior to convertibility. (April 1991).
hot zone. While economists discuss what the border is with hyperinflation, daily life and purchasing power are altered with double-digit monthly rates. Only in January was a CPI of 6% monthly shown, which annualized was projected at 100%. However, for a society accustomed to instability, the convergence with the expectations sown in a year of presidential turnover produced a strange effect. The longing for times of exchange rate calm appeared, exemplified by the illusion of dollarization. But also, the intolerance of more patches that would prolong the long stagnation of the Argentine economy: since 2011 the GDP per inhabitant has not grown and everything indicates that 2024 will not be the exception. In any case, there could be a turning point…if everything goes well. Perhaps that is why, in its annual global survey, the consulting firm Voices! showed that 42% of Argentines are optimistic (against 39% of the world average) but 18% did not know or wanted to answer, versus 7% in the rest of the planet.. This would reveal that uncertainty gained ground in this dizzying end of the year. In economic matters, strictly speaking, 29% believe that 2024 will be a year of prosperity (vs. 26% globally) and 51% see it as a year of difficulty.
The foreseeable devaluation of the official exchange rate immediately after the inauguration of the new administration, with a jump of 115%, boosted the price of dollarized products and, among them, those of food, which had already been experiencing weeks of increases by above average. The consulting firm Invecq gives it a 37% increase in the four weeks prior to Friday, December 22. For its part, EcoGo projects an increase of 34.9% in the item and a general index of 29.4% for all of December.
Economist María Castiglioni, director of C&T Economic Advisors, estimates that January-March inflation will depend on many factors, not only the exchange rate, but also monetary factors and expectations. “Monetarily, how much currency does the Central Bank really eliminate with the bonds for importers, when would the treasury reach financial balance and therefore not need any financing from the BCRA, and it could even occur until the Treasury was contractive,” she exemplifies.
Weight wave. The fear of imminent dollarization had produced a rush to count the peso that, paradoxically, produced the effect that was wanted to escape: the demand for money fell to the detriment of a dollarization of portfolios and the banks quickly changed their placements in Liquidity Letters (Leliqs) by passes, with daily renewal, waiting for news. The strong bet of the Caputo-Bausili tandem (the new president of the Central Bank) lowering the interest rate paid by the securities of the happy “snowball” produced a gradual disarmament, but entering the risk zone of increasing the demand for dollars in financial markets. The abrupt fall of the exchange gap at an unprecedented 12% (the lowest since the end of 2019) occurs when reserves begin to retrace the downward path of recent months and redouble the commitment to eliminate the questioned discretionary import controls (the SIRA with which importers were, in fact, slowed down , access to foreign currency. The regularization of the debt accumulated last year that was forced by the economic authority due to the fall in the exportable balance due to the drought (estimated at about US$22,000 million). It will be done with a bonus that will serve to absorb the excess pesos in the market. In this way, the purpose of not altering the flow of inputs necessary to avoid hindering production will also be met.
Green and red lights. The inflationary jump was something foreseen by those inside and outside the Government. It was based on assumptions: firstly, the unsustainability of the program carried out by the former candidate Massa in his capacity as Minister of Economy: basically, expand the fiscal deficit with expansionary measures, freeze public service rates and manage the shortage of foreign currency to the extreme without resorting to a devaluation. In addition to the consumption bubble and a certain pre-electoral well-being, What this policy produced for several months was to intensify the distortion of relative prices. And the quickest way to correct them in an inflationary economy is… with more inflation.
The exchange rate jump was accompanied by the sharp rise in the prices of food, cleaning supplies and other deregulated services and could continue with another Cinderella of the Platita plan: updating rates. Many of them were tied to an “official” dollar of $400 or even less if they had a previous value of origin. Now these values must be renegotiated in their entirety and the acid test will be with the gas sector, which hopes to achieve a realistic value for its rates that would more than triple the amounts in some cases.
Urban transportation has already acknowledged the increase in its costs with the increase in diesel, which would bring the “technical” value of the rate on which the subsidies are applied to $1,000. But Economy promised to change the calculation system starting in January… which is above, to apply one that subsidizes demand instead of supply. This would also apply to other public services, so the final effect on the user is not yet clear.
And an existential doubt would also continue to float over the entire cost of the entire network of bonuses and relief for the consumer since many of them (such as metropolitan trains, buses, AYSA, EDENOR and EDESUR) are provided totally or mostly in the AMBA. and are financed by the national Treasury. An issue that throws Governor Axel Kicillof and Head of Government Jorge Macri to the complaints window. The province of Buenos Aires continues to give to the rest of the country almost half of what is collected from national taxes in its territory and in CABA, the latest draft laws promise to transfer the functions that were missing, but that imply an additional budget.
A summer that, in addition to the auspicious rains for the resurrection of exports, predicts multiple open fronts and an uncertain outcomeimpossible to measure with certainty with the parameters in force until now.
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