The financial crisis unleashed, in various phases, since the beginning of June reveals how profound the nominal instability of the local macro is. With leaps between 55 and 65% in financial and informal dollar prices and an expected inflation that has risen by as much as 15 points annual it is clear that the speed of events can only be moderate with vigorous measures, politically consensual reforms and a cohesive government.

If not, the new spasms will be even more destabilizing on degraded private expectations and it will amplify defensive and precautionary behaviors. Not only soybeans will be kept.

Hence, understanding that he is forced to throw a “Damage containment strategy” is that the coalition will be able to overcome – with shock, but without explosions – its last year and a half of management. There are no mysteries, although there are many doubts as to how it could be done. Now the how is more important than the what.

The absence of dollars confronts the government faced with the dilemma of choosing how to stop growing. Whether through an induced recession that reduces the demand for dollars or does so through a devaluation whose effects it cannot control.

Recessive fiscal and monetary measures such as reducing real government spending and raising interest rates, in line with the IMF, tend to mature more slowly than the speed of the crisis. Even the delayed DNU that formalizes the “single box” for state expenses that the minister has promised, or the budget for 2023, which will be presented to Congress only in September, albeit important, they might even be late.

In front of this narrow gorge, the paths inexorably overlook would lead to an outburst. The worst of all is that of a netless, poorly implemented devaluation, which has no fiscal and monetary minimum order. perceived as feasible in the short term. Not only would the gap not decrease, but inflation could increase and worsen the social picture.

Another high-risk path is that real interest rates are insufficient, given the speed of the crisis, to contain investors and initiate a sustained drain on bank deposits.

Retail pesos would increase pressure on financial dollars and the blue. For companies that need to access the MULC to import, the incentives to leave banks are lower but, in any case, they risk minimizing deposit terms and perhaps increasing their holdings of dollar securities, taking advantage of low prices. .parities, which would continue to exert pressure on the spot with the liquidation.

Even a wrong choice to cut primary spending could become a destabilizing factor. We think that only 16% of the total expenditure (in essence, the discretionary transfers to the provinces, some current expenses and the always sanctioned, in contexts of adjustment, public works) are highly flexible items. Insufficient as a signal, but advancing in others of medium flexibility (36% of the total), such as social programs, will trigger a political friction that is difficult to manage, limiting the real ability to adjust spending.

Containing damage as a premise would be sound policy in the final stage of government. Margins have shrunk significantly, management capacity is in question and credibility has deteriorated.

Opening the game to other sectors and actors (including the opposition) and uniting the factions within it should be part of the new agenda of a government that, so far, has misdiagnosed macroeconomics, imagines enemies among those who have the funding they need. and procrastinate solutions. The margin of imagination and lack of coordination was exhausted.