Javier Milei is happy to have Luis Caputo in his team and in the minister also because he believes that the president lets him act.
One of the most visible and controversial aspects of the adjustment was the minister’s decision to eliminate subsidies for urban transport in the provinces.
The interpretation was immediate: Milei withdrew the Omnibus bill from Congress because he believed that there would be no particular approval and that the cutting of voices came immediately.
It was Caputo who spread the message that no political failure of the party in power has overshadowed the process of adjusting public accounts aimed at financial surplus.
Stock prices plummeted and bonds plummeted, but not to the extent expected: Will it be an indicator that the market believes the Minister that the fiscal surplus objective has absolute priority regardless of the political costs?
In Economy they say yes, and celebrate in silence some moderation in the pace of price increases this would have occurred in these days of February.
I am limited and silent celebrations because the cost of living increase this month would be about 18%, driven by electricity, gas and gasoline rates plus prepaid bills and school supplies that have begun their traditional seasonal increase.
But the adjustment, based on an important liquefaction of pensions, salaries and time deposits in pesoshas entered a new phase different from the one that has characterized the Argentine economy starting from 2023.
The new cycle is generated by the sharp decline in sales since the beginning of the year in response to what was the price flight after the December devaluation.
Today, companies and businesses have left behind the worry of not losing the race to rebrand and prioritize attention quantities sold.
Some mall businesses say sales are down as much as 50%; in the beverage sector there were drops of 10/12%; textiles, 30%; construction, 20%; drugs, 3%. The discount war also demonstrates the new phase experienced by the downward trend in quantities sold.
Discounts are reborn 50 to 70% on second units in supermarkets, bank and media cards and discounts for pensioners have gained greater importance in the household spending basket.
Economists always resort to the PxQ formula (prices per quantity) to define the moments of consumption and, in this, the smallest quantities sold gain prominence.
For families, the adjustment is very strong and a key issue in the environment revolves around it how much recession will be necessary lower inflation in a process like the current one of deregulation of a large part of prices.
For Economy there is a previous partial answer relating to the definition of a path for the official dollar starting in March.
The result is that the $800 started after the December devaluation is updated at a rate of 2% monthly significantly lower than inflation, Therefore, a part of market participants and analysts consider an increase in the exchange rate in April is inevitable.
The vision of the economy is very different and the dominant point of view is not only to maintain the fixed exchange rate policy (floating has been banned), but also that of the delve into the use of the dollar as an anchor in an attempt to moderate the price increase.
That view could change in the coming weeks, though The Central Bank purchased 6.8 billion dollars After the devaluation, the need to provide a good exchange rate for rural exports, so that they sell more dollars, will be a convincing argument to avoid the feeling that the dollar is lagging behind.
Devaluing to encourage the entry of more dollars or not to do so to prioritize the moderation of price increases will be the dilemma next month but, in the meantime, the key will be to check the political future after the failure of the Omnibus bill to pass in Congress.
Source: Clarin
