There are two unknowns plaguing investors. One has to do with the government’s ability to get through the election with the economy more or less under control, and the other has to do with the next administration’s leeway to make a tougher adjustment. For former Finance Secretary, Miguel Kiguel, Sergio Massa will advance a “partial” devaluation. with multiple exchange rates, but without paying the “cost” of the adjustment what the opposition is asking for.
“There will be no devaluationwe will have many exchange rates, a 3 soybean dollar that will be $67 pesos higher than the current one, there may be another dollar for tourism, where $500 million a month is lost, they talk about the Malbec dollar, they won’t devalue the official, they will continue to create exchange rates and will command tourism, imports and exports, It’s actually a devaluation, but they won’t call it that to preserve the narrative,” the economist said.
The director of the consultancy Econviews analyzed the landscape during a speech on the economy and the elections organized by the financial group Adcap, which includes Javier Timerman and Paula Gándara. In this context, he referred to the tensions with the opposition, which he published in a month three exits denounce that the Frente de Todos will leave a “bomb” and that the debt swap agreed with the banks will cause a major “inflationary leap”.
“The opposition wants, if it can, the government to pay the cost of the adjustment. It is about devaluation and inflation and the impact that can have is a social cost people on the street“, he argued. And he asked himself:” Can he populism and spend more? They don’t have much room, there’s no reserves, the dollar is going to go up very fast, so they want to spend, but they have to come in with the economy in good shape and that’s keeping them from going crazy. the situation is very fragile“.
Despite the scale of the problems, the former head of Banco Hipotecario and a former Central Bank official believed there was a “chance” that Sergio Massa would make it to the end of the year “with many imbalances, but without an explosion”. And he warned that the two main “explosion risks” that the market follows is the debt in pesos and lack of reservestwo concerns that have been exposed this week with the exchange and loss of foreign exchange by the BCRA.
For Kiguel, the debt in pesos is “complex” to renew, but he specified that the operation underway with the banks to start at least 50% of the maturities envisaged up to June by 2025 “will further reduce the uncertainty of the market”. and stated that although “the opposition has reacted strongly, is the best solution now”, although he acknowledged that it will involve a rate hike and that the next administration will continue to face short deadlines.
In the case of reserves, he explains that the problem is greater, since there would not be enough regulations to manage them, as is the case with local currency debt. “It’s more complicated because if the government runs out of reserves, it has nowhere to go for more dollarsit is the greatest threat and is made more difficult by a drought that is the largest in the last 20 years, worse than that of 2018, when Macri had to devalue”, he warned.
According to his calculations, net reserves today stand at $2.2 billion, a level “similar” to $1.5 billion when Massa took office. In this context, he assured that imports will continue to be limited, the Central will sell reserves in March and the next disbursement from the IMF will be a “temporary relief”. “The problem is that the dollar is overvalueda devaluation is needed to have an exchange rate similar to that between 2003 and 2009,” he insisted.
As for the elections, former administration official Carlos Menem hailed them as a “game changer” and forecast a “fiscal adjustment” to achieve a fiscal surplus in 2024, from a primary deficit of between 2.5 and 3% of GDP in 2023, cutting energy subsidies, public investments and transfers to the provinceswhich will generate “resistance” in companies, unions and provinces, but “it is feasible”.
This “strong” program, according to the economist, will not be “as difficult” as it was in 2001 or after the “hyper” in 1989″.We’ll go back to 2015 and we’ll do it right this time.” he has declared. And he questioned Macri’s unification of foreign exchange and the elimination of equities due to the increase in inflation and because there was not a “shower of investments”, but rather the influx of financial flows that allowed to quickly build up reserves. “Now it won’t be possible to do it, it will be an anticipated devaluation”previous.
Source: Clarin
