“In this urgency, either the gap is lowered or the dollar is adjusted”

Following Sergio Massa’s upcoming US tour with appointments with IMF Chief Kristalina Georgieva, Treasury Advisor David Lipton, a company with subsidiaries in the country and Wall Street investors, the Ministry of Economy is in contact with AmCham, the Argentine-American Chamber of Commerce. The entity covers 44% of US companies and the rest of other countries. Taken together, its associates represent 19% of GDP, employ 450,000 people and contribute 39% to the collection. The United States is the largest foreign investor in the country. And given the degree of transnationalization of the local economy, AmCham in Argentina is the largest in the entire region. The Economic interviewed Facundo Gómez Minujín, the new president of AmCham, and its CEO, Alejandro Díaz.

—Are you helping the government with Massa’s first tour as economy minister?

Facundo Gómez Minujin (MGF): When these official visits are enabled, one of the roles of AmCham is to organize all connections with the private sector. Thus the CEOs of American companies are summoned to meet the Argentine state but not through the American government but directly with the Argentine government; that partnership, that link is maintained by AmCham.

—What scenario are they conveying to those CEOs?

MGF: Massa is a person who, beyond the role he has today, has always had a close relationship with the United States. I remember being involved in many of the restructuring of various debt and financial matters and related to the United States even when he was chief of staff in the previous period. With whom he has a fairly close relationship.

Alejandro Díaz (AD): He has developed a very good relationship with Nancy Pelosi, which is no small feat. It is not normal for a Minister of Economy to have the possibility of this antecedent. Naturally in the context of being the president of the Chamber of Deputies of the Nation. He also has an excellent relationship with the National Security Council headed by Juan González. This allows for a fluid dialogue which will then have to materialize with multilateral credit organizations, such as the IDB, —But is that enough?

MGF: In Argentina, nothing is ever enough. The problem is what Massa outlined in his initial communication, broadly speaking of where we are going. Subsidies, fiscal balance, compliance with the IMF. The great lines that are drawn. It seems important to me because it could have been others. In a government where there are certainly three different legs and the ideological definitions are very different. But as the Americans say: “the devil is in the details”, that’s why the problem in Argentina is always the execution of what has been said. Now comes the execution and this is the most important thing.

—Do you think it will be able to reach a deficit of 2.5% and the level of reserves committed to the IMF?

FGM: The strengthening of central bank reserves is essential and adds to the problem of inflation.

—AFIP is looking for an extra advance profit, how did it go?

AD: You have to see what it is.

“Will Massa be able to get the dollars he needs?”

FGM: It will all be somewhere in between. You may not get $ 5 billion, $ 6 billion quickly, but you can get a lot more than there is today. And the Central Bank will gradually stop drying up. An important point is that the energy payment in August will be $ 600 million less. There will be regasification vessels that will be sold; there is an additional income that is perhaps not much, but 4 or 5 billion dollars. For me, the most important measure they have taken is the pre-financing of exports. Exporters will receive a higher rate from the Central Bank. Basically, it is anticipated, it is a short blanket, in the sense that if you do not take action later, you will consume what you will be paid for later, but in the short term it relieves you in this situation of extreme urgency.

—With the prices of Argentine assets so devalued, can investments come?

MGF: In the short term we are dealing with these emergencies, we are all measuring how many dollars go to the plant per day. It is very difficult to invest in a context where you have such an unstable situation in the short term, where decisions are sometimes not even economic, but rather political. It is very difficult for any treasurer, for any CEO of the companies represented in Amcham to make a long-term decision, it is necessary to stabilize the economy. There is a view that Argentina needs change, it can be called adjustment, structural changes. But it needs something to be able to transform itself into a more positive and pro-investment country.

AD: There is a lot of concern over the issue of imports. Until the short term is resolved, the imports are not resolved. So you save energy, but then you end up spending money on imports.

—And how is the dollar question resolved?

FGM: The underlying problem is the reserves and the gap, which is dramatic for any type of investment in Argentina. Either the gap is narrowing or the dollar is adjusted. Because when a gap is that big, the only thing it generates are distortions in the economy, the economy slows down, it’s inevitable.

—How can the gap be lowered without devaluing?

FGM: If these measures are successful, if the interest rate is positive and the Central Bank has enough dollars, the gap will narrow.

—In that scenario, does confidence come back?

FGM: The only positive thing that is seen in Argentina’s development in recent years, because clearly there are no deep structural measures, is that at least 70% of the political sector is realizing that, without fiscal balance, Argentina cannot achieve growth and fails to stabilize its economy with these problems we are talking about. Finally, it ends up legislating company by company, sector by sector, typing who the dollars go to, how imports are opened. But I think there are 70% of the industry who seriously think that fiscal balance is key. Especially in a country where public spending has grown from 20 to 40%. And where there are no financing possibilities. The difference with other Latin American countries is that any country, except for the situation in Venezuela, can access the capital market.

-Massa has just successfully swapped debt into pesos …

MGF: With the question of what will happen after 2024 with the same bonds we just financed in 2020. But the swap worked because banks, somehow, need to refinance their assets.

—When interest rates rise, isn’t there a danger of a recession?

MGF: No, because in Argentina, as I see it, the risk of recession due to inflation is much closer than the risk of recession due to the rate. Argentina is a country where the rate has a much smaller impact on economic activity than other countries in the region. Precisely because Argentina has a very low level of debt at the corporate level and in general at the level of citizens. Hence, the impact of the rate on the recession is much less than inflation, and there comes a time when a recession occurs, because the values ​​are so high that people stop consuming.