Obstacles, gaps and risks, the minefield awaiting Sergio Massa in Economics

The market does not expect to immediate devaluation. Not at least for this Wednesday, the day when Sergio Massa will announce the measures he worked on yesterday and in the next few hours he will finish reviewing.

Investors speak, in any case, of a jump in devaluation for later, “in the coming weeks” For example, he puts JP Morgan bank in a report for his customers for the past few hours. Yesterday Massa spoke of a plan for the first ten days. Will the deployment or “jump” occur there?

Bank of America and the consultancy Eco Go, for their part, agree that a formal exchange rate splitting would today be a better alternative to devaluation. The sequence would be this: first deploy, give time to inflate reserves (the network would be less than US $ 2,000 million), then devalue.

All this, of course, accompanied by tax announcements and interest rate hikes.

Days ago, before Silvina Batakis left, there were BCRA directors in favor of the deployment. Miguel Pesce objected in a board meeting that lasted more than three hours. He argued that this would open the door to further devaluation.

Will it still hold the same?

Sergio Massa tries to seal his interference in the bank. It was what Martín Guzmán proposed to Alberto Fernández that Thursday before leaving and he didn’t succeed. Massa could. Like his successor, Guzmán was in favor of the unfolding. Pesce stopped him too.

Will Massa be able to do what his predecessor tried?

The new minister will fill the bank lockers. It would take a person for the office of one of the two vice presidents, Sergio Woyecheszen and Jorge Carrera. Both came from the hand of Miguel Pesce.

There is talk of Lisandro Cleri for an important chair. Will it be from Woyecheszen or from Carrera?

Cleri worked at ANSeS FGS with Martín Guzmán and Diego Bossio. And one of the current directors, Pablo Manuel Carreras Mayer, a solvent young economist and former Cippec who replaced Diego Baustourre weeks ago, came to the bank on her recommendation. Massa is betting on the formation of his circle of trust in the bank.

“Today Saturday we work remotely”, confirmed yesterday a man from the bank and admits that there are contacts with the new minister. Today, Sunday, there may also be a meeting, in view of the presentation of the names tomorrow. “We can’t say anything,” this person replied.

The announcement of a dollar correction for this week is not what the market expects.

“The jump in devaluation to compress the exchange gap is not part of the tools that the government would be willing to use”says a report yesterday from Eco Go. “Incipiently, an informal deployment strategy is emerging.”

The BCRA created a special soybean scheme this week that improves the producer price by 13% in Euro MPs and guarantees free coverage for 70% of the sale.

“With this inflation and exchange rate gap, politics prohibits validating a devaluation,” says Sebastián Menescaldi, economist and director of Eco Go. “There may be something in between until we embrace the variables.”

“Our point of view is that there should be a devaluation, but as the government resists -begins by saying the work of Bank of America-, we think that a formal deployment would be much better than controlling imports ”.

JP Morgan, Bank of America and Eco Go agree that beyond the sequence with the exchange rate, the key is to announce a stabilization plan that reduces the gap, the rate and opens the price system.

“A stabilization effort is needed to prevent further acceleration of inflation,” says JP Morgan.

Interest rates have risen and have bridged the gap with inflation. It also allowed the Treasury box to be rebuilt because the government managed to capture more pesos from the market than the deadlines it faced. But as the rate of price increase accelerates, You should also do the same when adjusting rates.

Massa will have to face, in September alone, one billion pesos in due dates of the local debt. The good news is that most of these holdings are in the hands of the public sector.

Everything indicates that the minister would have no problem meeting fiscal, monetary financing and reserve accumulation targets for June. This means that he will have access to an IMF disbursement of approximately $ 4.1 billion for September.

However, those of the second half seem more difficult, especially those of the reserves. If the gap does not close, the demand for dollars will not decrease and it will be difficult to raise dollars even in a carry trade. Pesce has bought only $ 460 million since the start of the program with the IMF, despite the bank having liquidated $ 15 billion. Why would Pesce be right to buy dollars after August, when agriculture liquidates such a stock if it fails to close the gap?

An economist who knows Massa says the new minister had trouble putting his team together. From a group of economists who two months ago invited to a barbecue (Martín Redrado, Marco Lavagna, Miguel Peirano, Lisandro Cleri, Diego Bossio and Martín Rapetti), “Only one would be at his side until today”, comments one of those present. It would be Cleri. The rest, for the moment, would not be there. At least for now. And Emmanuel Alvarez Agis? Will Matías Tombolini go?

“It will be important to know the names,” says Ricardo Delgado, director of Analytica and economist who accompanied Massa to the FR ten years ago. Delgado reflects on a characteristic of the new minister. “His link with the opposition, companies and trade unions”.

Those who are inside are Federico Basualdo and Federico Bernal. Basualdo will remain in the orbit of the ministry. Some of those who would not accompany Massa want to see if the vice president goes to his inauguration. “It would be a gesture in these ten days”, they say.