The “Massa plan” in crisisassures the consulting company Ecolatina, founded by Roberto Lavagna, one of Massa’s references.

Second Ecolatina. THE drought, dollar lockdown and restrictions in the face of the elections make the economy very fragile. “Even under tight conditions, net reserves showed unsustainable momentum until the beginning of April: They decreased by 5.6 billion dollars at the lowest level since early September last year, when the government was forced to activate the first version of the soybean dollar.

Here are their arguments:

• Central bank sales were record US $3,500 million, for a minimum agriculture liquidation with a 65% decrease from 2022, derived from the impact of drought on wheat, the early liquidation for the “2.0 soy dollar” and the incentive to hold pending a third edition of the plan.

• Inflation accelerated again hurting the economics team’s credibility in coordinating expectations and forcing the BCRA to accelerate the pace of the crawling peg (the official devaluation) and raise rates for the first time since September.
• On the other hand, after 6 months of sharp real reduction, the primary deficit in the first quarter of the year was affected the lowest withholding tax levy and was the third highest in the past 30 years, in a framework in which the financial program remains adequate, supported by continuous purchases by the Central Bank on the secondary market and by the return to Temporary Advances after 8 months.
• In this context, economic activity has fallen by 2.1% in the last 6 months and, more recently, the exchange rate differential has risen to its highest level in the Massa era.

• The management of Massa is conditioned by three main threats: (1) “against the dollars”: the scarcity of the net supply of foreign currency increases the probability of a moderate jump in the exchange rate, this being the main “Achilles heel” of the scheme; (2) “in front of the weights”: given the risk that a decline in the Treasury’s refinancing rate would lead to a large issuance by the BCRA (due to the bailouts) which would put pressure on inflation and the foreign exchange market (“Dollar front”); and (3) “in front of prices”: the inflationary acceleration not only undermines the Government’s “political capital”, but also makes the scenario more unstable: it generates greater pressure to raise interest rates and accelerate peg crawling (feedback of price dynamics) to avoid a higher rate exchange rate lag makes it even more difficult to accumulate reserves (“dollar front”) and control the gap.

• The main purpose of the Massa plan is avoid a disruptive scenario (crisis) associated with a discrete and disorderly jump in the official exchange rate which generates an inflationary spiral and a sharp contraction of economic activity, in the context of a complex social situation, with the ultimate aim of supporting the electoral competitiveness of the governing party to face the elections.