The bad news for the economic team was not surprising, but it did speed things up. To the measurement of the CPI for February, which showed 6.6% and 102.5% year-on-year, the figure for the basic food basket was added, which gave 11.7%. The projections for the month of March with a floor of 7%, taking into account that seasonally there are increases in prices that have more incidence in the family basket. Meat, for example, has already risen 45% in the first two months of the year, due to the alteration in the livestock cycle that forced the liquidation of bellies during the second half of 2022 and managed to make its price grow by almost half the annual average (94 ,5%).
The future. The prospects are not the best in this field. Meat won’t be the only rogue variable. With the collapse of the illusion of reaching the second quarter with inflation of 3 or 4% per month that supported the reference of 60% per year included in the budget, the last defenses were demolished so that the economy as a whole enters into a more indexing dynamic. strong. Argentina has a vivid inflationary memory and the persistence of the last 15 years with double-digit annual rates and going through the three-digit rate as a floor for 2023 revives self-defense mechanisms. JP Morgan & Chase predicted that, with these new rearrangements, inflation will be 115% for this year.
First of all, heDelayed rate segmentation to update rates will end up having an impact later but less timely than expected. The fiscal account in the red due to the subsidies for the energy system (2% of GDP for last year, to which almost 1% more would have to be added in the transportation system). The decision not to let services as basic as the urban bus continue to be delayed shows that the margin to make things more flexible has also been diluted.
The recent blackout and the conflict around the power cuts that quickly put Edesur in the crosshairs (it came to have almost 80% of homes affected) exposed the precariousness and short-termism with which it has been managed in the last 20 years in the rate-cost equations. The AMBA region is the main pro-government electoral stronghold that contains 40% of the electoral roll and its rate, according to a study by the Observatory of rates and subsidies of the Interdisciplinary Institute of Political Economy of the UBA, shows that, in February, the rate of Edenor and Edesur was almost half the national average, when everyone buys energy from CAMMESA at the same price.
the dry box. The climate did not take pity on the ambitions of the former superminister either. For the third year in a row, La Niña hit agricultural production but this time, unlike last year, the combination of a drop in production of almost a third and prices that did not have the peak effect of the war in Ukraine of last campaign. The calculation of how much the loss will be worsened as the drought devastated the fields of the core zone, the hardest hit. The consultancy EcoGo calculates that the decrease in foreign exchange earnings will be US$25,000 millionYes, almost double what the market estimated at the beginning of the summer. The external debacle is such that if Argentina stops paying the Fund the minimum insured, nothing would change. For example, in the usual tour to scratch the bottom of the pot, this week the granting of a loan from the Andean Development Corporation (CAF) for US$285 million was announced. It did not last long: the economist Fernando Marull He ironically pointed out that as soon as they “arrived” they left with the sales made by the Central Bank the next day. So far in 2023, the Central Bank’s reserves have fallen US$7 billionwhich explains the financial pilgrimage of the members of the economic team.
The fall. The latest measure taken by Sergio Massa was to intervene directly in the dollarized bond market to put a ceiling on the incipient rise in financial dollars. To do this, it chose to manage under a single unified command the operations of the National State’s own dollar-denominated bonds in the portfolios of decentralized agencies, which in the jargon was called “interstate debt”.
But the main holder of this type of bond is none other than the ANSES Sustainability Guarantee Fund. In total, it is estimated that almost a hundred organizations have US$35,000 million that could now be used to contain the bullish current of the dollar without issuing money and its consequent inflationary impact. “The State, without using BCRA reserves, will continue rescuing and delisting global bonds, reducing foreign debt”, argued a tweeter gabriel rubinstein, became the spokesperson for the official strategy. Some see this maneuver as the silver bullet to try to postpone a devaluation and the fear of an exchange jump unleashing an inflationary storm.
salary for few. The most sensitive variable was the first to disobey the suggestion to establish guidelines for increases of 60% in parities. As they expire, the agreements in the most powerful private sector unions are closing with trigger clauses to camouflage the true increase. Above all, they are including more frequent updates of their own in an inflation that is around 20% quarterly, coincidentally the percentage agreed by the Metallurgical Workers Union. The Banking Associationled by the official deputy Sergio Palazzoinnovated: obtained 32.5% for the first five months of the year (5.8% per month) plus an extraordinary payment of $450,000 to cover the payment of Earnings.
The state unions, for their part, are also attentive to this evolution and it is very difficult for a government in its final stretch to have the strength to face a conflict with its public servants. Trade unionists have been in front of their organizations for decades and know that their loyalty lies with their support base, their affiliates.
Thus, the price-salary race will only accelerate, but it is difficult for there to be a born winner in most of the sectors under agreement. Instead, the adjustment will fall on those who do not have tools to protect themselves from the slowness of the expected adjustments: informal and self-employed.
However, The last link in this chain that is not broken is that of employment: low wages (it is estimated that on average, the average purchasing power fell 20% in the last five years and 35% for the informal workers). that achieve that unemployment (8% for Greater Buenos Aires in 2022) is not for now an adjustment variable. But this figure hides a situation that worsened: the low rate of labor participation. For George Hilleconomist of IDESAis due to three reasons: the scarcity of available jobs, the lack of capacity for employment and the low remuneration of the available jobs “These three dimensions are the ones that should guide the labor policy agenda”he concludes.
The labyrinth of the Argentine economy was not complicated, but rather an external factor (drought) revealed its structural failure as rarely. As if to reinforce that if a good harvest saves us, a bad one can sink us.
