Come back Guzmán, we forgive you! During his administration, the main argument for not validating a more realistic value of the dollar, given the inflation only contained by the succession of controls and stocks, was that an exchange jump would accelerate inflation. Finally, a few hours after the closing of the PASO elections, a 22% devaluation of the official exchange rate unleashed the inflationary race. A posthumous victory for the former minister, now the scapegoat for the difficulties of Sergio Massto?
compensations. Once the starting shot was executed and seeing the speed with which the economic agents adjusted their prices, the dance of measures began to try to improve income or directly contain prices for a while:
- bonuses for retirees, private and public employees, between $10,000 and $60,000 that must be implemented through a regulation in the Official Gazette but that must be coordinated with employer provinces and municipalities that in principle do not adhere.
- More funds for the Alimentar program and the Potenciar trabajo plans to face between $10,000 and $23,000; deferral and reduction of the tax part of the monotributo and subsidized credits for retirees, workers and monotributistas.
- After the rise in fuel and transportation in August, a 60-day freeze.
- Attempt to reissue a new agreement Fair prices.
- Suspension of already agreed increases in private medicine in families with income up to $2 million per month.
Climbing. The decision to raise the official exchange rate to $350 was already announced with the movements of the previous week, when the Central Bank accelerated the mini-devaluations (the “crawling peg”) at a monthly rate of 14%. Curiously, it was also what the International Monetary Fund estimated that the exchange rate was behind: between 15 and 20%, issue documented in the “Staff Report” that was released when the approval of the fifth and sixth revision of the current agreement was formalized in which Argentina was exempted from the goals agreed upon in a timely manner, especially with regard to the accumulation of reserves and financing of the fiscal deficit. Above all, it contradicts the unofficial information spread by the Massista campaign powerhouses that the IMF had requested a much greater exchange rate honesty.
In the previous creed, the value of the (official) dollar was not a problem and what existed was a speculative attack that would be disarmed as the Government showed a clear course and concrete measures to undermine the truth of the “unfounded” rumors. In this case, the prophecy seems to have been fulfilled. Inflation, the great executioner of economic stability, seemed to have settled in the band between 7% and 8% per month when in June and July it saw a notch drop: 6% and 6.3% respectively. However, the previous drag carried the year-on-year increase in the CPI between 112% and 118%. But and also citing the ex-minister from La Plata, it was not a sustainable path.
The third and fourth weeks of August saw substantial price increases. Eco Go estimates the rise in food at 5.8% only in the fourth week of August and estimates 12.9% for the entire month in said item. For his part, C&T Economic Advisors estimate a CPI of 11% for Augustbut, in addition, with a drag of 5% for September, which in this way would also remain above double digits. In this way, year-on-year inflation for August would be in the order of 120%, but since the projection for September does not have a defined floor, it would go up another notch, to 130% year-on-year.. It will depend on the evolution of market dynamics and expectations, in the form of an electoral calendar.
accumulators. The Achilles heel of the 2023 version was the great drought, which set a national record for agricultural production and deprived US$22,000 million of exportable balances. The way in which the economic authority was able to put out the fires was by using reserves in danger of extinction to put a ceiling on financial dollars (the MEP and the CCL). understanding that in this way devaluation and therefore inflationary expectations were deflated.
Also in the enlightening IMF staff document the unknown of the magnitude (negative) of the reserves was revealed: -US$10.300 million and the “liquid” ones are even lower: -US$14.100 million. In addition, many of the holes that the economic team was covering used all the lines opened with international organizations and with China, through the use of swaps that also reached a ceiling (US$6,500 million), and then remained at the equivalent of US$5,000 million.
The key will be, from now on, how the flow of income and expenditure of dollars will be. In the first concept, exporters benefited from the new version of the “agro dollar” and are liquidating earlier to avoid the inflationary impact. There is not much more to it than that: the US$7.5 billion that the IMF contributed is to cancel the previous advances and transfer the next payments. In practice, the next time the technicians reconsider new goals, it will be with the incoming economic team.
On the expenditure side, the worsening of the stocks only has one limit and that is the paralysis of some economic activity, lacking a fluid supply of inputs, which also makes those goods more sensitive to imports more expensive. However, the concern lies above all in the difficulty in paying for purchases, which are accumulating a debt with importers that could rise to US$20 billion by the end of the year.
All these elements add tension in the market: prices are no longer the only benchmarks, solutions are postponed and various voluntarism is appealed to appease the remarking dynamic. One more distortion, but with a fixed term: it is discounted that on October 23, several of these pressures should be released. Looking for analogies, some thought about the accumulated pressures prior to Rodrigazo (1975), but the economist Fernando Marull warns that at that time the Government came to the explosion with a deficit of 13% of GDP. For now, the projection shows a 5.3% total red. As long as there are no new derivations of the recidivism of “putting money in the pocket” of the voters.
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