Dollar, rates, decline in bonds and inflation: the four urgent issues that Silvina Batakis has in assuming

The new Minister of Economy, Silvina Batakis, will take on her role in the Palazzo del Tesoro this afternoon (scheduled for 5:00 pm)but it will not have a smooth arrival. at least it has four great challenges in front of: dollar, tariffs, bond falls and inflation.

The rise of the dollar and the widening of the gap between officers and blues. What will happen to tariff segmentation. process that Guzmán started and was half finished when he slammed the door. The sharp decline in government bonds in recent weeks. And inflation (the June data are already on the table and will be released in the next few days. In general, these are the strongest challenges that the new minister will have to overcome.

It is not yet clear which direction he will take, if he has to correct, change direction or keep things more or less the same. What is evident is that the appointment of Silvina Batakis comes to complete the pending tasks of Martín Guzmán, including the renegotiation of the debt with the Paris Club (a journey that the former minister was supposed to undertake this week), the definition of the new electricity and gas tariffs, and promote a drop in inflation.

Batakis has known the public function and corridors of the Palacio de Hacienda since serving during Cristina Fernández de Kirchner’s first term in the area of ​​the Ministry of Finance. In addition, the new head of the Palacio de Hacienda managed the Economics portfolio in the province of Buenos Aires between 2011 and 2015, during Daniel Scioli’s second government.

What are the most important challenges:

Dollar

One of the most important that Silvina Batakis will have to face concerns the reaction of the markets. Already on Sunday evening, after the announcement of the woman who will replace Martín Guzmán at the head of the Economy, the first reaction was noticed. The crypto dollar, the only market open over the weekend, has already grown in value with the resignation of Guzmán (up by more than 7%) and it continued its climb until it was above $ 300 according to the prices of the most used virtual wallets in Argentina.

It remains to be seen how the rest of the prices, which had been firmly on an upward path from previous weeks, will open. Just for today, the government has a temporary advantage: This Monday is a public holiday in the United States, so what happens in the local market will have no external reference.

Dollar bonds and country risk will not work, as will Argentine equities in New Yorktherefore the market reaction could last until Tuesday.

“The urgent measures should come from the side of what Guzmán had done in exchange, fiscal and monetary matters,” underlined some economists.

The government does not have sufficient reserves for balance the foreign exchange market. After the tightening of restrictions to pay for imports and accumulate US $ 1,500 million in foreign exchange purchases, the Central Bank sold US $ 190 million in energy import payments on Friday. In that context, financial dollars remain above $ 247 and $ 251while blue closed higher on Friday, at $ 239.

Inventories added to imports allowed BCRA to accumulate reserves during the week and even allowed it to reach its accumulation target for the first half of the year. According to official data, reserves closed at $ 42,784 million in gross terms on Thursday, about $ 4,780 million more than last week’s close, thanks to having accumulated over $ 1,500 million in foreign exchange purchases and to the relocation of some United States. $ 4,000 million in SDRs sent by the IMF after the approval of the first revision of the Extended Structures Agreement. On Friday, the trend was reversed with the sale of $ 190 million.

Inflation

The urgency to control the inflationary process will become one of the most delicate issues for the new minister, who will have to carefully manage the tariff update based on the cut in subsidies for electricity and gas consumption.

At the same time, it will not be able to overlook some macroeconomic issues, such as the renegotiation of the debt in pesos which is maturing and on which it is necessary to reschedule the terms, for which the management of the interest rate and financial assistance to the Treasury must be coordinated with the Central Bank.

Tariff segmentation

More than 15 days have passed since the publication of the decree which took into account the segmentation of electricity and gas tariffs. Since then, however, progress has been weak. We will have to see how he is now, if you press the accelerator or if you recalculate the decision.

Last Wednesday, the Undersecretariat for Energy Planning approved the digital affidavit that all electricity and gas users must fill in the Grant Access Register (RASE) in order not to lose state assistance in the tariffs of both services. But the form has not yet been published on the official page.

It is estimated that if the segmentation of electricity and gas tariffs is successful, the National Administration it could have annual savings of between $ 600 and $ 750 million, measured at the current official exchange rate. The amount, which is small in relation to the overall number of grants planned for this year, would be drastically reduced this year due to its complex and late implementation.

Goals with the IMF

Batakis also awaits the review of the quantitative targets agreed with the International Monetary Fund (IMF) under the current Extended Facilities program, which will allow the country to access another tranche of fresh-funded financing and strengthen the reserve system. .

Negotiations with the IMF will begin by the end of the monthalthough the agency has given the Argentine government more room for maneuver so that the achievement of fiscal targets can be managed throughout the year as long as the deficit is 2.5% of GDP by the end of 2022.

The financial market is now waiting for signals from the new minister both in financial and foreign exchange matters, and in measures to contain inflation.

The new minister has launched two important signals in the last few hours: she will respect the agreement with the IMF and will align herself with vice president Cristina Kirchner. In this way, from their environment they tried to clarify the doubts that arose in the last hours before the versions promoted by some sectors of Kirchnerism on a possible revision of the agreement with the institution after Martín Guzmán slammed the door.

YN