The photo of the economic situation cannot be separated from the film in which the Argentine economy has been moving for months. Because taking only the picture of the strange combination of growing inflation, acute shortage of foreign currency, fragmentation of the exchange market and erosion of the income of the population, even those who have a job, from which even those who maintain a job in white. And all this, framed in an electoral peak that, with the results of the almost perfect survey that are the PASO, injects uncertainty about the direction that economic policy will take as of December 10.
speeds. But the dynamics must be viewed in deeper aspects and with much more lasting effects, even, than an election period. The Government, which successively chose the “heavy inheritance” of the previous administration as a ballast that did not allow its plans to unfold, the pandemic later and the war in Ukraine finally, was able to find an explanation for the crisis in the worst drought in a long time. palpable that the economy is going through. Even the most pessimistic projections made at the beginning of the year when the campaign had not yet ended were conservative to what was presented. Between US$20,000 million and US$22,000 million will end up being the drop in the exportable balance of the agricultural sector. The data is not minor because during the Fernández government, this sector was the great engine of the fiscal surpluses that it accumulated: according to calculations by Salvador VitelliHead of Research at roman group, of the US$160,000 million exported from 2020 to 2022, no less than US$33,383 million remained in the BCRA reserves. That they are no longer there… In other words, the drought of dollars came after three years of an export boom (due to the post-pandemic international price boom and the collateral effect of the war in Ukraine, another major grain exporter). The Argentine economy did not know how to accumulate them for eventualities or to be able to intervene in an exchange market that, being highly fragmented, exposes the most vulnerable segments to speculative movements in order to “shield” the Single Free Exchange Market (MULC) in the short term. ) through which the bulk of transactions pass. However, the policy chosen from the beginning by former minister Martín Guzmán de using the official dollar as an inflationary “anchor” led to a delay in its value in real terms and encouraged the demand for dollars for imports while discouraging exports. In the short term, these tools produced desired changes, but at the same time they distorted the relative price scheme, altering the balances in the goods and services markets.
Weights on offer. Another negative impact had on the result of the fiscal accounts. The fall in exports (especially that of soybeans and corn) automatically implies a decrease in collection measured in real terms by the participation of withholdings over total income. Gabriel Caamano, economist of Estudio Ledesma estimates that the accumulated fiscal deficit in the first seven months of the year reached 1.3% of GDP, to reach 2.3% with the financial one. But projecting a scenario like that of previous years, it is the second semester when the greatest imbalances occur. In other words, what is coming will be an even greater challenge due to the usual tension between the cashier’s administrator and the requests for eventual “little money plans” formulated by the campaign teams. Although, this time, both should have the same leadership, with which the dilemma moves outside of Economy, because fiscal imbalances automatically translate into the need for more financing and this in an increase in interest rates to renew maturities that look askance at devaluation expectations.
What economists call “remunerated monetary liabilities” and what jargon has already dubbed the Leliq “snowball” and all those bonds that serve to absorb excess pesos resulting from successive fiscal deficits and accruing interest, they can be dimensioned with a calculation that exposes the fragility of the monetary equilibrium. It can be measured in how many months of interest a complete monetary base generates and the answer is astonishing: in two years, it went from almost 12 to 2, an abrupt drop that shows the exhaustion of the leveraged financing policy with the rise in the interest rate. interest. A real vicious circle.
The other answer to this question lies in the effect that the successive increase in the inflation rate had on the demand for money. As the CPI climbed and found new floors, said demand fell and thus went from a peak of 9% of GDP in 2021 to more than 7% a year ago to continue falling to less than 5% of GDP estimated for the month of August. It is assumed that the latest inflationary push and the devaluation in stages will accelerate this process with a perverse effect: for each point of monetary expansion it will have a greater inflationary impact.
On reserve. In this context and with the Central Bank working without a network, the alternatives that the economic team had in the last quarter to avoid shutting down economic activity were the trickle of loans obtained by begging diplomacy in international institutions or sovereign wealth funds (such as that of Qatar ) or another turn of the wheel of the importing stocks. Only after the STEP was the flow of funds committed by the IMF to disburse US$7.5 billion that will serve to repay these bridge loans that avoided falling into an institutional default. For Vitelli, the prospects of being able to maintain the exchange rate set at the floor of $350 raises a lot of uncertainty because it will gradually depreciate in these two months. “This should encourage the liquidation of exports, but it is not being verified, sometimes due to regulatory obstruction and other times due to the presence of the exchange rate gap that feeds new expectations of devaluation”add.
What was surprising was the speed with which, this time, the 22% devaluation the day after the STEP, added to the mini-devaluations in the previous two weeks, hit the shelves. eco go calculates that the price of food will end up rising 12.5% this month and the CPI for September, just because of the drag effect, will also be above double digits. C&T Asesores Económicos also measures a strong increase for the third week of August, projecting 11.5% for August and predicts the same for the month of September, as long as the announced parameters are maintained..
In prices, the spill on meat and food by the “agricultural dollar” allows us to envision what could happen when the exchange market manages to unify, the condition for exports to have institutional support and Argentina stops regressing relative to the countries neighbors, who did take advantage of years of excellent terms of trade. It is almost a manifestation of impotence in the face of the “short blanket” scheme in which the economy has been immersed for five years, when the external balance was blown up. The good thing about an exhausted system like the current one is that the decision to do nothing is no longer available. The objective, now with more emphasis, became October 22, in which some of the questions are expected to dissipate.
