Wait at Quinta de Olivos for new definitions
The ergonomic chair occupied by Martín Guzmán is hot. The economy faces the same problems as last week, now aggravated by the premature resignation of the Minister of Economy. Anyone who dares to take his place must take urgent action, send signals and have strong support. This is the perception of economists as the government defines its replacement for these hours.
The new Minister of Economy will have to take charge of a board with most of the indicators in red: dollar under pressure and without a clear reference, reserves at the limit, inflation without a ceiling, input stocks, obstacles to imports, lack of diesel, default-priced bonds, rising fiscal deficits, wages behind prices, doubts about IMF funding and an increasingly weaker government.
“The first thing is to contain the political crisis, even if a strong Minister of Economy arrives, the profile of the new economic team is important: the the reaction will be different if it will be by Cristina Kirchner or if it will be pro-market, more Sergio Massa style“, said Fernando Marull, of the consulting firm FyMA.” The urgent measures should come from the side of what Guzmán had done in exchange, fiscal and monetary matters, “he added.
The government does not have sufficient reserves to balance the foreign exchange market. After tightening restrictions on import payments and amassing $ 1.5 billion in foreign exchange purchases, the Central Bank sold $ 190 million in energy import payments on Friday. Against this backdrop, financial dollars remain above $ 247 and $ 251, while blue closed higher on Friday at $ 239.
In this scenario, Carlos Melconian proposed last week to Cristina Kirchner to do a “classic fit” like the “Fabregazo(from the former head of the Central Bank, Juan Carlos Fabrega). It was when Cristina Kirchner’s management devalued 16% in a single day in 2014. But a devaluation could be dangerous with $ 5 trillion in net reserves, a 100% exchange rate gap and an expectation of inflation. 80%, according to Marull’s calculations.
“Soon, those who arrive must show support from the whole Front of All and give signals on what the course will be in the coming weeks. It must be financed, in dollars and pesos. For this, the agreement with the IMF is a pillar, the first six months leave a very negative result to predict that the annual targets can be sustained, “said Claudio Caprarulo, director of Analytica.
In the last few hours, the possibility that a figure linked to Sergio Massa, such as Martín Redrado and Marco Lavagna, will take over, given the apparent refusal of Emmanuel Álvarez Agis. The head of the Chamber of Deputies is met Alberto Fernández and his landing in the cabinet is not excluded.
Another of the open fronts is the financial one, given the Treasury’s difficulties in covering the deficit and the tremor caused by the race for the bond market, which affected the official financing strategy. The massive outflow of investment funds from pesos bonds plummeted the value of the bonds, forced the Central Bank to buy over $ 750,000 million, speeding up money issuance and complicating bond placements.
“The first challenge is that the current pesos debt situation is truly reversed. If politics does not want to make the fiscal adjustment, either they ‘reprofile’ the deadlines or pay them with a monetary issue. This government will avoid the former. at all costs and that is why he chooses the path of monetary issuance through the redemption of the debt in pesos and forcing the margins of the agreement with the IMF “, said Santiago Manoukian, of Ecolatina.
Close to the vice president, they believe it is necessary to move forward in measures to improve revenues and review the agreement with the IMF. Cristina targeted Guzmán on Saturday when she pointed out that the now former Minister of Economy thinks similarly to Carlos Melconian when it comes to the impact of the deficit on inflation. But from IERAL, the Melconian-led Mediterranean Foundation institute, they believe the government should move towards greater compliance.
“An attempt is being made to neutralize the overflows by sucking up liquidity through the Leliq, with an increase in this Central Bank liability of almost 800 billion pesos in 30 days. But this the pace is not sustainable, therefore it will be necessary to pay attention to the degree of commitment of the government with the latest promise to the IMF; achieve an adjustment of public spending of 7.8% on an annual basis in real terms in the second half of the year, so as to ensure that the primary deficit for the year does not exceed 2.5 points of GDP “, warned IERAL.
Martín Guzmán had asked for more power from Energy and the Central Bank and ended up falling into the harsh criticism of Cristina Kirchner
Giovanni Manuel Barca
Source: Clarin