It is almost obvious, if not entirely obvious, to say that the agreement with the IMF was accelerated by the noise and uncertainty that the debate on the so-called Omnibus law to Congress, for the impact that is already seen on the financial market and, finally, for the need to reaffirm a central piece of the change promoted by Javier Milei.
The only thing missing from such a cocktail was the appearance of some shadow on the payment of the debt to the IMF, and it is precisely this risk that Wednesday’s announcement sought to eliminate. She stood up, in the same act, the endorsement of the international organization for the libertarian operation.
With the net reserves, let’s say available, in deep red, Argentina has not had the opportunity to meet the capital obligations with the Fund which fall from January to April nor the already expired loan which, for the same purpose, the Andean Corporation of Promotion. This urgent hole was covered with an outlay of 4.7 billion dollars by the IMF itself, awaiting the agreement with Kirchnerism in 2022 which Alberto Fernández and Sergio Massa did not conform in their own way.
The immediate effect of the move was a drop in the blue dollar of 40 pesos in a single day and another 30 in the settled liquidities with which the companies operate. Added to this is the reduction of the exchange rate gap with the official dollar which, depending on the case, had already risen to 40-47% and the rise in the shares of Argentine companies listed on Wall Street.
It’s clear there’s a lot of financial jubilation here, and for the same reason no guarantee Let him move forward and claim victory. In some cases these are prices that had fallen too much or had risen too much.
But since nothing comes or will ever come for free with the IMF, there are always some clauses of the pact which, sooner or later, ensure the reimbursement of the agreements and among these some implemented by the officials of the negotiating countries themselves. This is, excessive guarantees or reinsurance often resulting from the need to improve the situation of the debtor.
“Where does it come from that the government intends to achieve a primary surplus this year (without calculating interest on the debt) equal to 2% of GDP?”, asks a specialist who has been seeing the agreements with the Monetary Fund pass for some time. The fact is that before now the goal was to reach the primary balance or zero deficit at the end of 2024, don’t go from a 3% imbalance in 2023 to a 2% surplus the following year.
The difference seems small, unless you calculate how much two points of Gross Product mean when measured according to the official dollar, i.e. at the most convenient exchange rate we have. We would then talk about the above 10,000 million dollars, Nothing more and nothing less. And from to further fiscal adjustment compared to that already announced.
The Minister of Economy’s attention is so focused there that Luis Caputo himself warned him The alternative to the Omnibus law is greater tightening. Will those two points be the GDP or will they be two points and something more?
Another big gamble by the government was to commit “a net reserve accumulation of $10 billion by the end of 2024, including the $2.7 billion accumulated in the final weeks of 2023.” It is important to clarify that these are dollars-dollars and not pesos converted into dollars, like the approximately 10 billion in fiscal over-adjustment.
In any case, this is a super ambitious goal, considering only that as of 31 December 2023 the net reserves were in the red, calculated at 9.7 billion dollars. The numbers game says we will accumulate 10,000 million dollars arrive at the end of the year with net reserves at 0.
The cursed legacy
Burdensome legacies in the environment that Kirchnerism does not want to recognize, a very serious one has just sounded: 25.5% in the December price index and 211.4% in the last twelve months. Even if the devaluation of the Milei had strengthened the inflationary shock of December, it is once again demonstrated that this process has been accelerating for some time and is also eating away at incomes and wages.
After all, the increase that accumulates the cost of food between the beginning of 2020 and the end of 2023, which is the complete K cycle. At an already impressive 251% last year, the index has accumulated 1,362% during that period, compared to overall inflation which was 1,146%.
If necessary, it is worth insisting there is no adjustment greater than inflation which reaches these heights and even more so when it comes to essential goods, which in many ways are irreplaceable and which mark the line of poverty.
And the series continues: according to the average forecasts that the Central Bank collects from local and foreign consultancy firms, the general index for January is already around 25%. That is, 56% accumulated in just two months and half of the increase that the Government added to the official dollar as soon as it assumed or, if you prefer, renewed expectations of devaluation.
The indicator managed by the BCRA says 18.2% for February, 15% for March and just single digits or 8.2% in June. The 2024 end-to-end forecast by the consultants marks 213%, that is, still soup and thick soup.
Predictably, we have, among other things, increases in electricity and natural gas rates, public transportation, prepaid bills and other such things. It would seem like music from another planet from some of the companies that have crossed the line come back with the rebranding, even in the face of a drop in demand such as that already observed in supermarkets and neighborhood shops.
In any case, inflation, which would begin to show signs of calm only after the middle of the year, does not seem like good news. There seems to be too much time to do this a torment that tires, which sows bad mood after bad mood and at a certain point can make pots and pans shake.
As in 2020, 2022 and 2023, this year too the annoyance is accompanied by a decline in economic activity.
For now, the INDEC index already marks seven out of eleven months of decline in industrial production. The one who touches the building scores eight less. The general estimate so far is for a 1.4% decline in 2024, with consultancies also down 2.6%.
They are all concrete facts, the kind that Cristina Kirchner loves to mention, even if they would hardly appear in her repertoire. And even less so in those who tell very predictable, generally self-referential stories, where criticism never strikes.
And if the point were the Monetary Fund, we would also be talking about the same IMF with which Kirchnerism renewed an agreement signed by Macrism. That they dumped him is not proof of independence, but rather one of those things that Massa is used to doing.
Source: Clarin
