Argentina has the best terms of trade in history, but cannot take advantage of them

President Alberto Fernandez will enter the books of Argentine economic history. It could be for several reasons. But we will choose one that is a statistical fact and therefore indisputable. During his tenure, an important event was recorded. It happens that at this moment the country is going through an instance that it would have envied all those who preceded Fernández in the presidency: Argentina has the best terms of trade since the records are kept.

is approx the most favorable ratio for the country between the value of what is exported and the value of what is imported. The index that INDEC has been preparing since 1986 reached in May 166, the highest number of the whole series. It is a record for the 36-year record reported by public statistics but also the highest since 1810, according to the historical series prepared by the economist Orlando Ferreres in his advice (see infographic).

Obviously, the decisive factor was to reach the maximum point sharp rise in agricultural commodity pricesproduct of several reasons: the growing and sustained global demand for proteins, accompanied by the loose monetary policies to which the countries have appealed to get out of the recession caused by the pandemic and, since February, by the impact it is having on the world commodity market as soon as possible the Russian invasion of Ukraine.

Of all these factors, two today are under discussion. US monetary policy is tightening up and this could impact agricultural prices, which often move inversely to the value of the dollar. The end of the war in Europe is unknown. This means we may see the peak when it comes to terms of trade and in a short time begins a descent.

The paradox of this unique moment for Argentina is that it finds the country with all the macroeconomic variables located. Double foreign exchange market with stocks and exchange gaps, import barriers and export withholdings, unbridled inflation, fiscal deficit that has no intention of closing and obstacles of all kinds for investment and production.

Conclusion: it is possible that this year will close with close exports $ 90 billion – another historical record – but it will be a bittersweet conquest: very few of those dollars will go to swell the meager reserves of the Central Bank, because the potential trade surplus will go to imports, especially to the expenditure for the purchase of energy, which the country is unable to produce or, at least, to intubate due to lack of infrastructure.

Not everyone is pale. Thanks to the export boom, the government was able to keep tax revenues high – through withholding taxes – and so on. prevented a currency explosion this would have occurred if the terms of trade had been lower than the current ones. An example: when the former president Fernando de la Rua soon came out of Casa Rosada, the terms of trade index – which today stands at 166 – was in just 90. De la Rúa left at the end of 2001, the soy boom began a few months laterin 2002. Those who came took advantage of it.

From now on, and as this Government can verify, the favorable trading conditions they do not guarantee happinessbut if this scenario had found Argentina with its orderly macroeconomics, today perhaps Alberto Fernández would be convinced, and rightly so, that “There are 2023”. The previous record in the series is 163 points and was set in 2012. In 2011 it was 157 points. That year Cristina won the presidential election with 54% of the vote.

Days ago, on the TN channel, the economist Miguel Broda talked about this.

“I don’t remember doing an exercise in which with these terms of trade we could do so badly. The problem is that today we have a extravagant economic programThe Central Bank does not accumulate reserves, GDP per capita is 15% lower than in 2011. It would seem impossible, but it is difficult that even if you look for bad results you can have these results. Even in the context of these terms of trade. The truth is that in 2023, in economic terms, anything can happen ”.

Francesco Ballester, of the economic consultant Mindy – created by the former head of BCRA Guido Sandleris – underlined before the consultation of Clarione that the terms of trade are today 22% above the average of the last 20 years.

“If we look at the last major commodity growth cycle, which was from 2002 to 2012, what the current government (Néstor and Cristina Kirchner) did was drastically increase public spending. A lot of money came in but they spent it all. Today we are in a similar scenario but the country is much more vulnerable, because the government does not have the capacity to increase spending and cannot finance it either with collection or debt. The only good thing about this extraordinary situation is that served to avoid a severe currency crisis. The unexpected inflow of foreign exchange saved the government from a major adjustment. That is why we will have to prepare for when prices return to the historical average. An adjustment will have to be made that day and the real exchange rate will have to be higher. A traumatic scenario “.

The Economist Andrea Borenstein makes a historical reading of what it means for a country to cross a context of very favorable terms of trade. “When this happens to countries, they could easily be considered a “fluke”, They are going through some difficulties, certainly opposite to what we have here. When that lucky break comes, countries are swimming in dollars, the opposite of what happens here, where we have to live with a trade trap and the gap with the parallel jumps to 100%. In economic theory it is called the phenomenon of the overabundance of dollars “Dutch disease”. This dates back to the 1960s, when the Netherlands discovered gas fields and this caused a large influx of foreign currency that depreciated its currency – the guilder – complicating the rest of the industries that were not related to gas. The same thing happened at the time Venezuela. Argentina today could enjoy that influx of dollars that the peso could appreciate and therefore wages in dollars would be much higher than they are today. “

If one thing is clear, it is that Argentina breaks economics books again. It remains the country whose GDP collapsed in the 20th century without having suffered a civil war anonymous for academics and today marks a new milestone. You should enjoy the moment, but all you talk about is the unbearable uncertainty caused by this crisis.