Five weeks ahead: Sergio Massa’s plan to stabilize the economy doesn’t hold up

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Sergio Massa assumed the office of Economy Minister in August 2022. The beginning of his management, and why not of his electoral campaign presidential candidateit had an initial “success” with the stabilization of the gearbox after the race caused by the departure of Martín Guzmán and the failed interregnum of Silvina Batakis.

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Although inflation numbers did not accompany – but predecessors could be blamed – Massa was encouraged by November’s inflation drop to 5.1%, which led him to say, in December: “For April, I expect an inflation index to start at 3.” April data will be out in two weeks, but March inflation, as before February, was proof enough that the target will be unreachable.

In the last five weeks, Massa has traveled a path which, between announcements and market reactions, has left him in a very difficult situation.

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Bond exchange. On March 21, Massa announced a financial transaction that caused a stir. With the express intention of having firepower for intervene in the alternative dollar market known as “MEP dollar” and “Dollar contado con liquidación” has presented, on the one hand, an order to ANSeS to deliver foreign law dollar bonds in exchange for “dual” type bonds in pesos, in which the creditor it is protected against possible devaluation because the principal due adjusts to inflation or the evolution of the exchange rate at maturity. In turn, it forces public bodies, including ANSeS, to part with their local law dollar obligations. With this, the Economy wants to have more securities with which it can influence the price of bond quotations and therefore keep cash at bay with liquidity. Since the announcement, the bonds have not stopped falling.

Soy dollar 3. On April 5, the government announced what the market already took for granted. The soybean dollar or agricultural dollar. An official change of 300 dollars to favor the settlement of soybeans and products of the so-called regional economies. A program designed to deal with the sharp drop in repayments in dollars due to the drought. The lack of water at least made him lose 20,000 million dollars to the economy, and a third of that money stops entering the AFIP through withholding taxes. With soybean 3 dollar, the government aims to get close to 9,000 million. Half for soybeans and the other half for the rest of the exports. A goal that today seems difficult.

The March Inflation Bomb. INDEC reported on April 14 that March inflation was 7.7%, surpassing all private predictions. It was a bad sign that the exchange rate race had begun, pushing up the dollar in all its versions. March’s CPI also had an impact as the minimum inflation expected for April rose with the exchange rate trend. Indeed, they started talking In May, inflation could reach double digits.

Lack of reflexes. Only on April 20, a week after experiencing March inflation, did the Central Bank announce it was raising its monetary policy rate, bringing it from 78% to 81% annually nominal. The market unanimously defined the Central Bank’s reaction as “tepid”, because it believed that the rate should rise much more. The reaction of the dollars was instantaneous: they went up so much that The blue dollar reached $500 pesoss earlier this week.

Exchange run. Skyrocketing exchange rates have caused a deep crisis in government. The gaps have once again skyrocketed above 100% and, as on previous occasions – October 2020 and July 2021 – accelerated decision-making in every way. Politically, the step by Alberto Fernández, who has given up trying to be re-elected. It was like passing control of the “button panel” to Sergio Massa.

The intervention. Spurred by the currency race, Massa announces that he will intervene in the alternative dollar markets beyond the disagreement of the International Monetary Fund and this Thursday he pressures the Central Bank to raise the interest rate again, bringing it to 91% nominal per annum. He had already done so the day before, confirming a rate hike in the debt auction for nearly a trillion pesos. After the week, alternative dollars showed a slight decline and blue was at $469.

With these premises, Massa will play all the chips to get from Monday cold silver to give some support to that strange announcement he made accompanied by the leaders of the CGT and the social movements: seek agreements to reach 90 days of stability. Come or stand, call it what you will. This is Sergio Massa’s plan.

Source: Clarin

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