Without devaluation, inflation has already jumped: the problem of paying the costs without reaping the benefits

Review of the 22 announcements of Serge Massa At the start of his administration as Minister of the Economy, there are two objectives he has aimed at with greater intensity: to give a signal of orientation to fiscal balance and try to obtain funds to strengthen the central bank reserves.

Shortly after, it becomes clearer that the achievement of the fiscal deficit target of 2.5% of GDP agreed with the International Monetary Fund, with the additional commitment that the Central Bank will not release to cover the red of the public accounts appears with more weight within the priorities.

And this responds to the fact that the Central Bank continues to have to sell dollars to replenish to a clearly unbalanced market at these prices and with the aggravating circumstance that a precise scheme was not defined from the beginning on how and at what values ​​the exporters would have to pay the dollars in case the producers (indicated as alleged hoarders) decided to sell them the grains.

Paying for energy imports (considered another bad thing in the film) required a record amount of foreign currency in July. Were $ 2.4 billion and the government hopes this demand will drop into the range of 1.8 / 1.6 billion dollars in Augusta very high level, but which would alleviate the scarce range of the Central’s liquid reserves.

A photo of the gearbox was included in a report by the consultancy company Eco Go on the first steps of Minister Massa.

He claims: “The BCRA has already amassed seven consecutive rounds (through Thursday) with net sales of international reserves in which it delivered $ 973 million. Therefore, during the year the plant sold 27 million dollarscompared to an accumulation of 6,727 million dollars in the same period last year “.

The minister anticipated and would be fully instrumental in the liquidation within 60 days of 5 billion dollars by agreements with the main exporting sectors of Argentina.

To this he said they would add $ 1.2 billion disbursements from ongoing credit programs with international organizations and an additional $ 750 million from a new program with CAF.

The key question and still unanswered within the framework of the gestating scheme is if these assumptions nearly $ 7 billion will be sold for $ 132.88 to meet demand received from the Central Bank for payment of imports and debt cancellation.

It is quite evident that a wholesale dollar at $ 132.88 is one of the cheapest products on the market and that at that price the pressure of demand will be important.

when the reporter Anabella Quiroga, of Clarin, asked him “if he felt comfortable with the value of the official dollar”, Massa, a skilled exponent, replied saying that a jump in the exchange rate would cause an inflationary flash which he is unwilling to validate. But that’s the problem the lightning occurred and the official dollar looks cheap and is the object of desire.

The inflationary leap (Thursday will see the 6/7/8% increase in the cost of living in July) has already arrived and started on 8 June when the market stopped the pesos loans to the Treasury and approved the resignation of Martin Guzman generating a shot of uncertainty in an economy characterized by having many pesos, a few dollars and having generated a 125% increase in the fiscal deficit in the first six months compared to the same period of the previous year.

As for the adjustment to meet the 2.5% fiscal deficit agreed with the IMF, the ratio of Marina Dal Poggetto says that the deficit before Massa rises to 3.5% of GDP and that “in order to reach 2.5% of GDP, it is necessary to strictly support the one included in the budget expansion two months ago armed with spending that grows to 63%, consistent with a 10% year-over-year decline in real terms“.

In other words, the adjustment, while contemplating an improvement in pensions, is likely to be brought about by inflation through a liquidation of public expenditure.

But what is not clear is whether setting a fiscal path tending to balance public accounts will take on more relevance than an exchange gap (difference between the official dollar and the free ones) greater than 100% which continues to mark the need to act fast and that the foreign exchange market continues to make noises.