– What is your assessment of Sergio Massa’s first 100 days?
– The situation is still complicated. When Massa took office as economy minister, positive expectations arose because he was seen as a figure with political force and who emphasized settling accounts to comply with the IMF. Today that expectation is more in doubt due to exchange restrictions, exchange rates he’s inventing that introduce more distortions, and import controls. This creates an expectation that the economy will enter a recession with inflation of 100% or more.
– The government has announced a price freeze for four months, is this possible with a rate hike and an acceleration of the official dollar?
– It’s ridiculous to think of freezing prices for four months when inflation reaches 100%. If this were the case, it would generate shortages, as has happened on other occasions in Venezuela and Argentina if it is not accompanied by a much stronger fiscal measure, included in the Fund’s programme. Argentina is expected to have a primary surplus of 2% in 2023. If we take interest into account, the global deficit this year will be 5% of GDP. So a freeze wouldn’t work, it would fail pretty quickly.
– And why do they do it?
– Maybe it’s a lack of understanding, they are disappointed that Israel did such a thing and they don’t take into account what the stabilization programs were like. Expectations are being lowered with serious measures, I wish they could eliminate inflation by banning increases like Aleksandr Lukashenko, the president of Belarus, but it doesn’t work anywhere.
– Doesn’t tougher fiscal policy induce a recession?
– No, Argentina is entering a recession because imports are prohibited, there is no climate for investment and job creation and there is inflation. We need signals for the future, that is, an expansive one. There is a lot of unproductive spending, they need to make a politically sustainable adjustment. For this, it is working. The 2023 Budget is unrealistic. It includes program guidelines with the Fund, which is bad because there is not enough market to finance the fiscal deficit and because of this it faces growing problems with domestic debt. So it’s very difficult to think about inflation below 100% next year.
– Do you see success stories in the region with this program?
– There are many countries that have adjusted their spending after the pandemic. Brazil, for example, has tidied up its fiscal situation. It’s capacity.
– Bolsonaro just lost the election.
– The case of Brazil is more comparable to the election of Trump in the United States, he was so close to Lula because the economy is good. If he didn’t do well, he would lose by bigger difference.
– Is the acceleration of the official dollar enough to stop the trickle of reserves?
– It’s a bad policy, it’s depreciating faster and faster. She says she doesn’t want to devalue, but she’s doing it at a rate of 100% per annum and pledging with the Fund to accelerate the official exchange rate if inflation rises, she has no pegs. And since reserves are almost zero, it generates pressure on the foreign exchange market. The official exchange rate was outdated. The exchange rate gap would have to be narrowed, which would remove the pressure to devalue faster and faster and more dollars would flow in. But what they do is create a preferential dollar for every industry.
– Does this weaken economic policy?
– It’s a distorting practice. The Fund demands that it stop and the government recognizes that to get dollars you have to raise the exchange rate, as it did with soybeans. These negotiated schemes are open to all types of corruption. Since you’ve shown that you’re willing to offer a higher exchange rate, no one will pay the officer. Economic policy begins to be managed by lobbies. You have anticipated the liquidation of dollars that you will later miss, which is what we see now. We need an exchange rate that is the same for everyone.
– The IMF has arrived in the country, what requests can it bring?
– The Fund has shown signs of strong weakness. It seems that all you care about is refinancing the loan. Perhaps the fiscal target will be achieved, which is almost the same as what happened last year. It was 3% and now 2.5%. Whether the IMF will allow approval of creative accounting remains to be seen. It gives the feeling that he will accept whatever it takes to get to the next government. It’s a bad policy, it doesn’t work. Therefore, the Country Risk is at 2,600 points.
– How do you see the current level of external debt?
– She is very tall. The external debt was refinanced with the restructuring in 2020. Today it is frozen. The government cannot issue debt on the international market and issue on the local market. Debt goes up, interest rates go up, and the term gets shorter, so refinancing is more expensive and worries about next year’s elections.
– Can elections have an impact on the economy, like in 2019?
– It is the opposite of 2019. When (Macri’s) government loses, it was perceived as bad news and, therefore, the market collapsed. In this case, there will be positive expectations if you lose. The question is whether or not to arrive without having a crisis first. If it goes into a recession, it will be with high inflation. The debt in pesos will depend a lot on the position of the opposition, which has so far been cautious.
Source: Clarin
