Rarely has the gap between the rhythm of the political agenda and the urgencies of the economic actors been uncovered like the weeks that have passed since June 30 until now. On that date, which today seems very far away, Martín Guzmán managed to take a photo of the variables of the Argentine economy to be able to show and pass the exam for the first semester of the year to be monitored by the International Monetary Fund. To achieve this, there were efforts to increase the reserves of the Central Bank, but not thanks to a sudden export explosion, but rather by stepping on imports and kicking other emergencies for later.
Measure. At that point it was already clear that no effort could balance the trade balance as much as necessary by itself, without coordinating actions and policies for such a task. The change of names at the head of the Economy portfolio did not alter the drain of dollars that marks the rhythm of the crisis under pressure. Both the ephemeral management of Silvia Batakis and the noisy appearance of Sergio Massa did not turn the tide: almost US$1,400 million left only since the last ministerial change.
Accumulated inflation for the year is 46%, which, annualized, would give 91%.but the Government hopes that the rounds of talks with “price-setting” companies and unions could result in a drop or at least that it does not shoot up even more and reach the fateful annual three-digit figure, something that has not happened since 1990.
It may interest you: “Lilita Carrió and the law to prevent presidential pardons for corruption”
The reserves touched their lowest level and the president of the Central Bank, Miguel Pesce, acknowledged that they had to use the China swap to protect themselves. Fernando Marul calculates that hehe net reserves for the end of August will be in the US$2,000 milliona calculation that also shares the IERAL. Your president, Charles Melconianstates that dSince December 2020, the Central Bank has been operating with negative liquid reserves, if gold holdings are discounted. That explains a good part of the chronic instability of the Argentine economy, but it is also its effect.
chinese business. The swap with China was a mechanism designed not to depend on the entry of dollars but that would be applied to bilateral trade.
For Francis Gismondichief economist at Empiria Consultants, if imports are paid with the swap (yuan), the net reserves end up falling the same, because the short-term liability increases. “Today I would tell you that they are already below US$1,000 million and even reaching zero before the end of the month if everything continues like this”, he comments. For him, the concept of “liquid net reserves” is subtracted from gold and special drawing rights (SDR, the IMF’s currency). “That has been negative for a long time, but it doesn’t say much,” he adds.
It may interest you: “Guillermo Moreno against the vice president: ‘Cristina is lost'”
For its part, Sebastian Menescaldi, chief economist of the consulting firm EcoGo explains that what is in yuan and is for a relatively small amount, for the needs of the system, between US$300 and US$400 million. “If this trend is not changed, something will have to be done, because the daily sale of reserves like the current one is not sustainable. Both the Repos and the liquidation of advanced reserves -after all, a loan- are temporary issues: you cannot take debt and give it to an importer at $140”, he points out.
At the center of the discussion is the value of the “official” exchange rate: Menescaldi suggests that something should be done with the interest rate and at the same time undouble the exchange rate or sustain a devaluation jump, “but within a comprehensive plan, because that alone would not work. Meanwhile, it only remains to tighten the trap and attack the outflow of tourism dollars, but not much more”, he adds.
“I don’t know if Massa has the political mandate to be able to abruptly alter the exchange rate. But when they see this dynamic, they will surely review it and end up making the decision to do something, sooner or later, ”he concludes.
Imported inflation? For its part, Camilo Tiscorniadirector of C&T Economic Advisors, warns that there is no way to reconstitute reserves in this way. “The Government has the idea that there is something transitory in all this flow due to the peak in energy imports, and this is partly true, but not to the extent that is needed to balance the balance,” he explains.
It may interest you: “José Sofo, the missing link between Cristina Kirchner and Lázaro Báez”
His vision is that the great unknown remains whether it will be possible to make the necessary change without a devaluation along the way, because what he sees of the delay in the exchange rate, which goes beyond the conjunctural. “With the increase in the value of oil, imports increased and the March peak in the price of exportable products was also left behind; they could even go down a little more due to the global recession”, he adds.
In the United States, the Federal Reserve (a kind of Central Bank for that country), is raising the interest rate carefully looking at inflation on the one hand and unemployment on the other. In July, the price index fell to 8.3% year-on-year (4.9% the average of the last three years) and in May economic activity seems to have come out of the negative zone of the last quarter of 2021 and the first of this year.
At the local level, Tiscornia sees that if it is about avoiding a devaluation, it is at the cost of restricting imports and that generates a decrease in the level of economic activity. “We still have a very large fiscal deficit and that implies more future emission. Therefore, with exclusively monetary instruments and these rates, the equation is not altered”, he adds. In addition, as the CPI floor rises, indexation mechanisms are unleashed: “the Central Bank devalues faster, public spending rises, rates and salaries increase, and there is more issuance. That is why the recent 60-day truce has been launched, which will fail if there is no serious fiscal adjustment”, he concludes.
The alternatives. The image of a reserve counter that marks the relentless descent as palace threads follow one another (not only on the fifth floor of the Ministry of Economy) and the measures that could at least stop the drainage are delayed, makes it less and less intolerable to take certain decisions. One is to use reserve requirements on dollar deposits that, until now, have remained untouched. Gismondi estimates that those corresponding to private holders, until August 4, had been rising and were around US$14.7 billion.. Another is that resistance to narrowing the exchange rate gap be overcome by converging on some type of exchange rate band, to cut the forwarding of import orders and promote the liquidation of exports, without spilling over into prices.
One year before the start of the elections, the decision on this swerve should be made as soon as possible in order to reap, at least, the benefits of a less unstable economic climate. From now on, any measure of fiscal containment is a bad word for the ruling party: the new bills have not yet arrived with rates that could be up to 200% higher than it is estimated that they would already be eroded by inflation by the end of the year. But that effort would only reward 0.2% of GDP in the best of cases.
Then, a structural change in the composition of public spending and its financing scheme will be left for later, impossible to carry out with so few backs and, above all, with the only consensus that the Government has behind closed doors: the fear of a landslide. of the economy.
You may also like
