The long vacation has not meant a setback in the course of the local economy. Macro data indicates a production slowdown which was already being felt before February. The medium-term scenario seems to be that of stagflation in the traditional sense of the term: production stagnation and high inflation. Data abounds on this. And they will feel stronger as summer ends and autumn arrives with a few more complications. Typical.
Between the problems that summer leaves us, there are the escalation of prices, the serious shortage of dollars, problems in the balance of trade, the debt in pesos, the change of sign in the fiscal result, the decline in the level of activity (four months of decline and negative statistical drag for the 2023), the serious situation of the Central Bank’s remunerated liabilities. To name just a few.
The official inflation for February will be known a few days before the change of season (March 20 at 21:00, to be exact). And it could generate some storm fronts. Especially since it would be almost a miracle at this point in February that lower food prices, the big monster trampling the CPI.
The drought drives up the price of fresh produce (fruit and vegetables) and also feed for chickens and pigs, especially and in part for cattle and dairy farms (and the dairy supply chain, of course). The lack of water added to the frost that affected the shots. It is also not excluded a new upward curl in the price of real estate from the appearance of the “mad cow disease” in Brazil, a country that had to stop exports of beef to China. It’s not hard to imagine what could happen if a Chinese trade mission landed on these shores.
Adding all these factors – plus the increases in regulated prices (fuel and other services), health and education, to name a few – and the unsuccessful result of Fair Prices (6.5% of the products surveyed by INDEC) could anticipate that March (February is already playing), it wouldn’t be a month to celebrate. Parenthesis: better not to talk about wages and 60% parity claims in an election year.
But not only people live on inflation. Minister Sergio Massa’s trip to India to participate in the G20 meeting has a central objective: to obtain funds from multilateral bodies and also “contributions” from some countries to the country’s weak reserves and to insist, more as a political concept than a financial one, that the Argentina should pay less interest to the IMF due to the effects of the war. The political support of some big names, such as the United States, already has it (Note: does the Argentine vote at the United Nations against Russia have anything to do with it?
The problem is that the government is in desperate need of dollars. Not only to cover the agreement with the IMF that reserves should amount to no less than $7.8 billion by March 31, but keep the local productive sector open, even with walkers. But there’s more. And this is why the visit of an official delegation led by Deputy Minister Sergio Rubinstein to the IMF headquarters in Washington is essential.
The Argentines arrived at the Fund with fourth quarter 2022 assignments as per a 10 Congratulations. It doesn’t matter how it was achieved (some consequences were seen in the January accounts, but it’s a spoiler). Government it urgently needs to unblock the transfer that the Fund is expected to carry out for 5,300 million dollars for many reasons. One, and fundamental, are the 2.7 billion dollars that will have to be paid to the agency on March 20 and 21, just as autumn arrives. With net unlimited reserves estimated at $3.5 billion, this outlay is crucial.
The issue of reserves would be resolved with a “waiver” (waiver) produced by drought, frost and other natural disasters. What was there too?
The government already had an early indication of the future of the lack of foreign exchange with the negative balance of trade in January. It was not a feared number, but the effect of the drought is strong, as are the expected sales of Soja I and Soja II. Necessary, yes, to comply with the IMF. The blanket shrinks again.
The goods trade balance in January recorded a deficit of US$484 million versus a surplus of US$300 million in January 2022. Exports fell by 12% dragged down by the 42.5% decline. in primary products due to the sharp contraction in sales of wheat and corn. While imports grew by 2.5% and reached 5,384 million US dollars, thanks to increases in fuels (96.1%) and parts for capital goods (21.4%).
Debt rollovers come with some ease thanks to a small rate hike, but eventually it goes up. The Treasury did not offer notes due after the PASO on Friday either. The market expects it It will only happen in the next debt swap to be offered in March. One month with maturities of just $0.7 trillion. Days we already have with us.
We talked about the agreement with the IMF and the importance of reaching the fiscal target. But this is history. In January, the national public sector posted a primary deficit of $204,000 million (0.12% of GDP), much higher than in January of last year, when it was $17,000 million. Worst start to a year in a decade, say those who remember. Revenues decreased by 3.2% over the year, due to the lower collection of export (-29%) and import (-17.6%) duties.
Ending five months of cuts, spending grew 6.3% intra-year in real terms, driven by increases of 3.7% in social benefits, 8.8% in wages, 10% in energy contributions, 9.5% of transfers to the provinces and 26.5% % in capital expenditure. Many of these disbursements they were postponed to December to reach the IMF safely. It used to be called “creative accounting.” Added to this was the sharp rise in interest payments which totaled $334,000 million (0.2% of GDP) and drove January’s financial deficit to $538,000 million (0.32% of GDP).
But there are other data to look at carefully. For example: until next September, the public debt in pesos of 13 trillion dollars is due, something like 2.7 times the monetary base, both for the liabilities themselves and for other obligations. If the dam that holds so many billions and billions under control were to break, the financial tsunami would be very difficult to control.
However, the version is already circulating on the market that the government and “helping hands” would allow the maturities of peso debt to be extended beyond 2023, a mechanism that could very well be a sort of “exchange. The possibilities for a ” refiling” ( Macrist neologism like few others) and much less a default (a cessation of payments in local currency would be unprecedented). It is known that 65% of the debt in pesos is in the hands of the officers. It would not be difficult to add a few trillion. In any case, it is preferable to place more intra-public debt rather than generate the disaster of the post-PASO 2019 financial process that definitively doomed Mauricio Macri.
Source: Clarin
