Alberto Fernández’s administration enters its last week of administration with much more work than it imagined. On the one hand, the Minister of Economy still in office and the candidate defeated in the runoff election receives countless requests for financial aid and emergency solutions. This week the economic inventory that remains for the next government will be finalized, but it is tinted red and Javier Milei himself bases his diagnosis: “we are entering stagflation” (stagnation with high inflation).
The legacy. Sergio Massa, from November 19 at night, opted for a very low profile. He received complaints from some businessmen about the vegetative activity of the agencies that should authorize the availability of foreign currency to be able to import, which exposes the situation of a Central Bank in check due to the depletion of its international reserves. Once again, the dollar ends up being the thermometer around which expectations revolve and decisions are made.
The decision from the beginning of the Fernandez management to segment the exchange market, meant the disappearance of a reference value. That is why a gap was generated with financial and informal dollars. The drought that reduced the exportable balance of the last campaign by US$22,000 million corresponds precisely to another indicator that was used to finance that downturn.: the increase in the debt of importers with parent companies or suppliers, which by the end of the year is estimated to reach more than US$55,000 million. But two other indicators were also marked in red: the Central Bank’s reserves (projected in –US$11,000 million by the end of the mandate) and the coverage that private parties try to make through instruments that the Central Bank itself issues to cushion the devaluation jump that appears imminent. The Economist Salvador Vitelli calculates that The stock of LEVIDs amounts to US$5.1 billion but added to other bonds that adjust “dollar linked” they reach almost US$10 billion. It is as if they were exchange insurance but that is paid after 180 days, that is, “whoever follows” should do it. Any similarity with the 2015 future dollar that ended up in court is not a mere coincidence. The current policy of authorizing the liquidation of part of the foreign exchange income in the Counted on Liquidation (CCL) for now at 50%, in fact it devalued 65% for the exporters included. Even so, the gap remains, but the expectations of moving towards a single dollar closer to financial ones triggered price increases, especially in the food sector. The objective of delaying the dollar was to avoid the inflationary spillover and charge a hidden tax on the export sector.
Supressed inflation. The other karma of the legacy of the outgoing government is inflation. Alberto Fernandez He received an economy with high inflation (54%) and was only able to lower it in the first year of his administration, when the pandemic and inactivity increased the demand for money and altered price indices. From there, everything went up and if the November CPI ends at around 13%, December could climb even further due to the rearrangement race that began this month. The projection made by the consulting firm EcoGo gives 13.4% for this month, but food remained close to 16%. TOYes, a CPI estimate of 180% for all of 2023 is already conservative and 200% may be more realistic if the thawing of many prices accelerates its pace.
General distortions. The additional problem did not end up being its total magnitude but rather the strong differences between the different areas. ANDl delay of some chosen as inflationary “anchors”, such as public service rates, the already mentioned case of the official dollar, medical services, housing and transportation expenses and some prices included in lists of the different consumer programs; They opened a gap with those of other sectors protected from competition (textiles) or free from these regulations (fruits and vegetables, post-pandemic restaurants, etc.).
In the case of transportation,to the very effective campaign of the ruling party alluding to the increase that the incoming government would make (to $1,100 for a bus ticket that today costs 20 times less) shows the great gap between the price and the cost of the service, on the one hand, and between the AMBA area and the rest of the country, on the other. In the cheapest areas the rate only reaches 15% of the total cost, which is covered with subsidies that consume almost 1% of GDP.
Other public services, such as water, electricity and gas, began to improve their equation with segmented increases, but this year’s inflation eroded all that improvement. In the case of electricity, it is estimated that the gap is 50% but much depends on the segment of the tariff schedule in which the consumer is located.
YPF on alert. Fuels were also protagonists of this election year. The tax on sales at service stations was frozen and the historical price of a liter of super gasoline (between US$1 and 1.20) was also delayed due to the exchange gap. and then with a ceiling price agreed upon after the August mini-devaluation. In reality, the entire sector is tied up: from the existence of the “criollo barrel” to the differential price of gas at the wellhead compared to the value of imported gas. A swarm of regulations and distortions that threaten a jump in production and the removal of the specter of shortages, such as what happened last October that ended up costing the CFO of YPF, Alexander Lew. As icing on the cake, the sentence that for US$16,000 million (almost three times the total value of the company) fell on the National State for the irregular nationalization of the company in 2012. Suggestively, the Treasury lawyers managed to delay the constitution of the guarantee guarantees for another month in order to appeal.
Without box. Finally, the fiscal effort that the “platita plan” represented due to the virtual elimination of the Income Tax and the VAT refund programs affected tax collection in such a way that for the provinces (which receive almost half of what was collected through co-participation) ) meant between one and three months of full salary, despite the fact that their own legislators enrolled in the ruling party voted for these facilities. That is why the request to Massa to compensate such loyalty with what is most precious at this moment: money before the epic of the chainsaw and the “No” as a State policy sends them to more unfriendly measures in their own territories. A hot summer for a pivotal year.
