We know this in May, but it happened in April. The leap of the dollar has led to a new inflationary leap The Argentina of repeated scripts.
President Alberto Fernández He commented, just hours before the release of April’s cost-of-living increase, that he told the Economy Minister, Sergio Massa“we have to stop” referring to the episode triggered by a free dollar that last month had risen to touch 500 dollars generating another bad news regarding the increase in the cost of living.
Implicitly acknowledging that the “king is naked,” the president elaborated on the dollar’s stampede (he never referred to the official exchange but to the free one) and its impact on price formation by commenting one of the worst economic results of his administration.
Though he claimed he told Massa they need to stop the dollar price rush, did not put forward the policy to be followed or the tools What could they work on?
In this field the government It has only one north, which is not to devalue, and you think it’s okay only one bullet in the magazine, as the rest of the tools have already been put into practice and used up.
Minister Massa’s silver bullet is known: that the International Monetary Fund advance the equivalent of the US$ 10,000 million accruing this year or, at least, half in the first week of June.
The date becomes relevant, not only because the Central Bank’s reserves have already exceeded a sensible limit (the “network” would be in the negative plane) but also for the political needs of the minister.
The deadline for registering applications expires on 24 June. for the primaries in August and Massa aspires to be the candidate for president of the governing party, making it a condition that the Frente de Todos go with a single list aligned with the vice president Cristina Kirchner.
If Massa’s candidacy depends on IMF dollars after the poor performance of the $300 agro dollar in terms of currency settlement, another unknown remains What level of devaluation will the IMF ask?
Will the Fund give the government $10,000 million to bolster reserves so it can sell them at the wholesale price of $229 when the liquidation dollar is $431?
Politics can make it possible. Government has topic of foreign exchange loss due to drought and ally Brazil goes through international forums asking for help for Argentina “for humanitarian reasons”. All for a dollar that allows something to stabilize a very serious situation.
A recent analysis by the consulting firm ABECEB deals with the wear of the tools to which it has appealed and with the Economy. Neither devaluations in installments (soybean dollar 1 and 2 and agro dollar) nor acceleration of devaluations against the official dollar not even the sharp rise in interest rates has managed to reverse the negative expectation of what is to come.
Equilibra, by Diego Bossio and Martín Rapetti, argues in its latest report that “there is no margin to avoid a deterioration in economic activity this year. To the negative drag of -03% in 2022 will be added the impact of drought, the shortage of dollars and an inflationary acceleration that will reduce domestic demand”.
And he concludes: “Therefore, we expect a decline in GDP in 2023 of at least 3%”.
The economic scenario for the rest of the year appears defined in terms of indicators and one of the big doubts is that of whether the march towards the elections will change expectations for 2024.
The shortage of government-held dollars makes it impossible to be optimistic about the level of activity.
The tightening of the exchange rate to stop the payment of imports and foreign debts fits into this gloomy panorama and, as ABECEB argues, the key is whether Massa’s plan to “get” to the election does not come.
In recent days the Government has managed to lower the exchange rate gap between the wholesale dollar and 88% settlement cash and, in another context, it could have been a sign of easing, given that a couple of weeks ago it largely exceeded 100%, which is considered a limit to measure distrust.
The point to consider is that the decline in financial dollars is being achieved at the expense of a government that sells, in an increasing and pronounced way, dollarised bonds at auction pricewhich is equivalent to borrow at outrageous dollar rates.
Source: Clarin
