Far from the electoral proposals of “Let’s set fire to the Central Bank”the stabilization program implemented a month ago provides for a “controlled shock” much more similar to what we imagined, albeit with a slightly different calibration.
Partly due to design issues: less extensive withholdings, higher PAIS tax, reimplementation of dollar blending prioritizing exchange rate gap control and not purchasing dollars from the BCRA, and a dangerous decline in the nominal interest ratel accelerate the liquefaction of excess pesos.
Partly due to delays in the very rules that supported short-term fiscal consolidation, the fiscal package was included in an omnibus law with 664 articles, including the approval of the DNU with another 366 articles in an all-or-nothing game. In fact, one month after the announcement of the economic program, the new export withholdings remain uncollected, while the deindexation of pension spending, if the omnibus law is approved (in whole or in part in the framework of negotiations), will be given after the mega-liquefaction of pensions that coordinates the inflationary leap.
Fundamentally, since the initial shock is amplified by the same regulatory decree which, at the same time, opens exports and liberalizes domestic prices, without paying attention to the disorderly escalation of costs in a context in which the impact on rates is not yet clear. Not so much because the desire to halve the incidence of subsidies (to 0.7% of GDP) has not been made explicit, but because it is not clear whether the entire increase requested in the hearings on the transport and distribution of gas and electricity will be achieved. validated. .
The extent of the inflationary leap and its moderation will depend on the underlying distributional escalation, on the ability to sustain the fiscal promise, on whether the Central Bank continues to purchase dollars, that the currency gap does not increase and the tolerance of politics and society towards the recession that the system will coordinate.
In the short term, the exchange rate anchor (creeping at 2%) tries to slow down the inflationary escalation coordinated by the shock (in December the CPI was around 25.5% monthly), to fall to 19.3% at January, 18% in February, 15% in March and approaching the figure from above in May pointing out that at that point the crawling peg and the interest rate will converge towards lower inflation?
For now, himreacted to the exchange rate gap and the exit from the 80%/20% scheme, essential for the BCRA to continue purchasing dollars, clashes with a lagging official dollar and probably requires abandoning the delayed withholding tax increase if a jump in the exchange rate, complicating fiscal anchoring.
At some point it must have changed a monetary program that includes a fiscal program (which is not based only on extraordinary taxes, new recycling and/or mega-liquefaction of spending) and in a financial program (which cannot rely exclusively on the recirculation of cornered pesos to the Treasury without perpetuating the perverse status quo of stocks).
The obsession with “milking” the excess of pesos, partly with liquefaction, partly with Bopreal and with the Treasury debt, seems to find some limits. For now, Bopreal’s goal is that 5 billion dollars (go 42 billion dollars of book debt), while the exchange of remunerated liabilities for Treasury debt, used to leave the BCRA financing for the Treasury to pay the dollar debt to bondholders at zero, appears to have reached this point as agreed with the IMF. The adjustment occurs by blaming the government for leaving with capital controls and no political competition, which would collapse the financial program as happened before.
If the anchor is credible, remonetization will occur and The economy is expected to recover at some point in the second half with a limited exchange rate gap.
Source: Clarin
