President Javier Milei expected that March and April will be two very difficult months for the population for the adjustment that is taking place and which promises to deepen.
The announcement that the government had achieved a fiscal surplus in January divided the waters: adjustment of activity level and the confrontation with the trade union world deepened, while The financial side began to improve.
The markets continue to raise their fingers against the minister’s management Luis Caputo which insists on the fact that the balance of public finances is non-negotiable. Doubts revolve around sustainability or not.
Pressure from state unions (transport, teachers, etc.) is increasing and a The central question is whether the government will have to lift its foot on spending cuts: The leaders of the “caste” are one thing, the low salaries of teachers, health personnel or the police are another.
In Economics they remain convinced of this The only possible answer is to reduce inflation. and, on this point, during the week the official forecasts changed: first February could give 10%, then the figure could get closer to 15%.
Whatever the outcome, Caputo has already announced that he does not expect another exchange rate hike for March (the wholesale dollar is at $839), demonstrating the priority he places on a significant reduction in inflation.
He has said nothing about whether he intends to speed up the process devaluation rate which is set, for now, at 2% per month, well below the rate of increase in the cost of living index.
The government aims to reach April, when soybean dollars will fully enter the current 2% monthly pattern and maintain the “mixture” of 80% official dollars and 20% cash with export clearance.
The decline in free dollars (the blue at $1,085 and the CCL at $1,093) was shaped by two facts: the mix increased supply in the CCL and the market closely followed a key piece of information: purchases of foreign currency by the Central Bank.
A golden but unwritten rule of the Argentine foreign exchange market claims that the price of the blue calms down when the Central purchases occur in the first part of the year about 200 million dollars every day. If the number is lower, the voltage increases.
Does this rule make sense? There is no scientific basis, but in recent weeks the good result that Santiago Bausili is achieving in terms of recovering reserves has been rapidly confirmed.
President Milei assured that the net reserves, which if assumed were negative for 12,000 million dollars, now amount to approximately 5,000 million dollars. An important improvement; The key continues to be the dollar amount of daily exports.
There is also the calculation of the 1816 consultancy in which Ezequiel Burgo published Clarion which argues that if the official dollar is updated at 2% monthly until April, the exchange rate will be similar to pre-Step levels, before the devaluation to $350.
While economic activity and the purchasing power of incomes decline, it is the financial aspect that brings positive news to the Government.
In February the dollar bonds They accumulate an average increase of 14% and lead the ranking of the recovery of emerging market stocks exceeding between 4 and 5 times the rise of other countries in the region, according to a report by consultancy Quantum.
Argentina leads the rally in this segment that began in late October when markets assumed the US rate hike cycle had come to an end.
Thus, Argentine debt increased in price and reduced its yield from 31% to 21.7%, although it continues to pay the highest yield among emerging markets. except for Ukraine, which is at war, and offers 42.1% per annum.
But Argentina 2030, which offers 29.4%, is far above Kenya at 9.7%, Pakistan at 15% or Ecuador, which pays 16.8% annually.
It is worth making a comparison taking into account the fact that Argentina is not alone in the second half and that the “overload” What the country pays is not high, it is very high.
After the meeting with President Milei, the second of the International Monetary Fund, Gita Gopinathleft a statement suggesting that “working pragmatically to gain social and political support is also essential to ensure the durability and effectiveness of reforms.”
The IMF thus adds to some of the important doubts that the business world has regarding the actions of the government.
Source: Clarin
