– Were the consultants wrong or right in 2022?
– Three years ago we finished first in the Latin Focus forecast rankings and came out first in the American Consensus, the REM (Central Bank Survey of Expectations) did not respond. The goal is to observe the scenario and adapt. In December 2021, Guzmán flirted with defaulting, governors and Kicillof appeared to get off the Sierra Maestra after running out of reserves. Then came the war with Ukraine, the government canceled the agreement with the Fund, the original objectives were not achieved but the modified ones, there was a political crisis when the gap widened to 160% and the inflation hovered at 7% a month, and then Massa arrived, not with a stabilization program, but with financial repression and an exchange gap, but with greater political wealth and an unprecedented negotiating framework.
– And how is this pattern?
– Suddenly, you find yourself a New Year’s Eve that, compared to the precipice, seems auspicious. The gap is in the 100% area and inflation is partly managed with agreements. It is a more pragmatic scheme with an interest rate, exchange rate and price gap. Massa offers companies access to dollars and asks them to contain prices in prepaid cards, medicines, mass consumption, textiles, footwear. And he was lucky that due to the drought the price of meat stood still. Now there is a lack of coordination of expectations, the global scenario is complicated and, as in all election years, the exchange rate has fallen, salaries have been brought forward and more has been spent.
– Is that what will happen this year?
– There are more and more restrictions, it could not be solved in 2019 and in 2021 the government delayed the dollar, launched the Platita Plan and thus all lost the elections. They will try to force it within the limits of the agreement with the Fund. The question is to what extent: The bond market is broken, saturated with Central Bank intervention, and there is $5.5 trillion of peso debt maturing before PASO. They try to kick the ball to the next guy and throw weights all over the place. We need to see what happens with the demand for pesos.
– And the dollars, are they enough to get through the summer?
– The first problem is inflation, the second is the distortion of relative prices and the third is the gap. The transfer from exporter to importer is very abrupt, there are 8 points of GDP, about 40,000 million dollars, what you spend on retirement. This year you have more pesos left and you will be short of dollars. The foreign trade administration is more efficient than that of Matías Kulfas, who had dollars for everyone. You will have 10,000 million dollars less, you will have to drastically reduce imports. The trap is a pressure cooker and you are raising the temperature by issuing pesos. And if you open it, your pot will fly into the air. That was the Rodrigazo.
– Can it have a new impact on elections?
– In 2019, the expectation that you would face a financial crackdown caused the peso and dollar debt market to explode in 2019, and if the next proposition is to quickly release the shares, your peso debt will collapse. The pesos are cornered and rotating faster and faster, but the risk of dollarization depends on the expectation of the contracts of the peso. Political speeches will have an impact and biases are very high.
-The government says there is a gradual reduction in inflation…
– The government wants to kick the ball to the next one, like in 2015, and the others don’t want the inheritance. The gradual reduction in inflation generates relief, but if you have Tuesday the 13th the management of scarcity will begin. The novelty is that the setup behind Massa managed to balance out more than expected. It’s too early to tell he’s holding up. There is a great symmetry with 2019. The difference is a very tight stock, the pressure is not on the official dollar, but on the gap and inflation across the gap.
– Is there a wave of rate hikes in the summer, how do you see inflation?
– The scenario is not one of stability because it is not optimal and it is at the cost of accumulating imbalances. It’s reaching to the other side. Massa has some consensus on the economy, but the Fund, establishment or coalition define the vote. If the gap slips away or you have to tighten dollars sharply, inflationary dynamics will heat up.
– Are there any chances of devaluation this year?
– I canceled it as a scenario once the Fund does not object to your performance. The government does not want to devalue. It will try to match the declining rate of inflation with devaluation. Now, if you have a 7 or 8% jump again, are you going to lag the dollar again? Some jail bunnies come out, but wizards often get the same, some are commercials that stop being commercials, some appear. The Fatca (data exchange agreement on Argentine accounts in the US) and the swap with China, even if they are not enough to compensate for the lack of dollars.
-Shall we go back to the debate on gradualism or on shock?
– There’s not much scope to finance gradualism, you won’t be able to correct relative prices or devalue gradually, you’ll doom yourself to higher inflation. The devaluation is raising rates, it is used to liquefy excess pesos, the problem is what kind of shock. To get out of the gap it is necessary to devalue and compensate with an increase in temporary withholdings and that growth is not with liquefied wages.
– Who gets hurt and who benefits from a shock?
– Not wanting to devalue is like when Susanita did the banquets to buy beans, it’s hyper-regressive. The effects must be compensated. Perpetuating this pattern will come as a shock, the question is when. In Cuba and Venezuela it lasted with some political control. Massa has political wealth, but for a change he doesn’t use it. The discussion is whether it can be perpetuated or whether you can have a financial crisis beforehand.
– Does that rule out a financial crisis?
– I’m not ruling anything out. She begins to give an arrangement that wasn’t there and times get longer.
Source: Clarin
