The markets also entered a voting phase: the ideal was put aside and what is being considered is the very short-term future. In summary: the Plan Arrive that ended with fairness at the polls on October 22 (that’s what it was designed for) now needs extra time. What seemed impossible, obtaining those four additional weeks of economic oxygen and, above all, reserves, could be achieved the day after the victory in the first round of the minister-candidate: a virtual segmentation and devaluation of the exchange market.
Green family. The creation of another exchange rate was simply established with the possibility of settling a mix between the “official” dollar and the cash settlement (CCL), the submarket through which companies enter or withdraw foreign currency with the purchase and sale of dollarized public bonds. Thus, less than 24 hours after knowing who entered the ballot, the Government took the first step to close the main gap that was fueling the vertigo that took over the markets in the last week. The exchange rate was thus calculated between $500 and $525, depending on the price of the CCL which, in view of a greater inflow of foreign currency, collapsed from the peak of $1,100 prior to the elections to stabilize a little below $900 (a -18%), remaining again below the blue that remained stuck at $1,000. In this way, the gap between both exchange rates could be reduced from 120% to 45%. One less problem in a storm front that required this correction only postponed due to the inflationary effect that a devaluation would bring on next month’s prices.
Inflation is the other bête noire for the electoral perspective of Sergio Massa That’s right. This year the CPI did nothing but pick up speed, successively breaking the proposed ceiling: from the 3.5% projected for April by the Minister of Economy at the end of last year, the floor continued at 6% monthly and ended at last quarter comfortably above double digits (between 11% and 12.5%). Now, with a stabilized dollar and the implicit one-month truce, the slowdown in prices will be able to offer in the last measurement of the INDEC before the runoff (it will be November 13). Sebastian Menescaldi, associate director of Eco Go points out that they lowered their forecast from 11% monthly to 9-10% based on their own measurements. “In some way, Massa’s competence in the runoff gave a framework of certainty in the midst of the past chaos. Because if he lost or was left without a chance, the power he had would be liquefied, no one was going to give him much attention in terms of exchange rates or prices,” he explains.
Parenthesis. For Menescaldi, the calm can last until the election, but then it would have to be revalidated because the agenda of issues to be resolved is inexhaustible. ““The current system with the stocks, I don’t think it wants to live four years on the brink of the abyss: whoever comes will have to implement a stabilization plan as something inevitable,” concludes. In the middle there is also the doubt about the continuity of contracts and the heavy inheritance of internal and external debt that, it is assumed, an official candidate could not boycott.
The bet for this time of electoral vigil is that the devaluation of day 1 will take a while to reach the shelves, as it did in August after the PASO. Maria Castiglionidirector of C&T Economic Advisors, it is not clear what the final effect it will have on the generation of dollars from exports. “We believe that they are going to use all the reserves, the SDRs, etc., to sustain the most possible types of financial changes with a very high cost in negative reserves and stop you from activity.d” he emphasizes. C&T also projects inflation of between 9.5% and 10% due to the impact of some prices last week.
In any case, Castiglioni sees a very complicated combo due to the fiscal cost of the previous electoral measures, which, he says, is already being seen. “More financial tension was generated and the rate increase that the Central Bank implemented to counteract it accelerates the growth of LELICs and their financial weight.. And the dollarization plan that had boosted the rise in exchange rates and expectations of devaluation seems to have lost steam for now. “That helps decelerate prices for now,” she estimates.
Threat. Precisely that price race during this year was what strengthened another big problem that either of the two winners of the elections will face when they take office: it is the enormous dispersion of prices that was accumulating for almost four years and even a little more if we take the great devaluation that occurred during Mauricio Macri’s administration. For Salvador Vitelli, head of Research at Romano Group, it is an aspect that is undervalued for now. “The focus of the discussion is logically on other urgent issues, but it seems to me that we should not lose sight of the issue of the rearrangement of relative prices which, probably, is very likely to generate more inflation. This will especially affect the most vulnerable sectors, but it reveals, even in the case of rates that are delayed and difficult to pay, the drop in purchasing power in a wide swath of the population,” he points out. “It is impossible to think that a certain amount of prices is going to be adjusted without adjusting the general level, therefore, there will be some months in which you will live with a little more inflation, it will free you from inflation and well, logically “This will harm the purchasing power of the salary,” close. In his opinion, this aspect will be the great pending issue for the next government since he also sees as inevitable a sincerity of the exchange market that would widen these gaps.
It is what IDESA mark in a recent work: the erosion in the purchasing power of education and health sectors, which depend in part on the provinces and are based on the real salary of professionals. According to INDEC data, the formal salary of the economy fell by 16% but private school fees were reduced by 18%. and prepaid medicine fees fell 23%.
The future. The good news for the next government comes from the side of this year’s executioner: the climate. At least, it would not be a disadvantage when it comes to having more foreign exchange income (and therefore for the Treasury). But to foresee contingencies, Massa’s other move was to add to the Budget 2024 that already comes with questioned assumptions, an “annex” in which basically promises a fiscal surplus for next year. Thus, the economy would go from a deficit of almost 4% of GDP in 2023 to an unusual +1% by 2024. The formula? attack the “tax expenditure” that almost 5% of the GDP is consumed through tax exemptions. There is everything there, from consumption subsidies, to the Tierra del Fuego system and certain taxes. A timely way to present an alternative to the chainsaw on the other side. As always, the diagonal between the two will mark the legislative discussion after December 10.
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