Rodolfo Santangelo economist. Photo: Federico Imas
– With his partner, Carlos Melconian, they always have a label at hand to name the economic programs. Have they already mentioned Sergio Massa’s plan?
– For now we just call it “little program” which is less than a program and more than a patch.
-Neither one thing nor the other.
– Let’s say it’s not a big problem, it’s not a big attempt to stabilize the instability, because we will continue to live with the instability. It’s a small program to keep it from turning into a spiral. With all due respect I say that Sergio Massa is like a Caruso Lombardi who comes to see if we can save ourselves from relegation.
– Will you make it?
– The biggest problem is that the road to change of government is very long. We have 16 very difficult months ahead of us And this is no small problem, we have good intentions, but we don’t know what the result will be
– How do you rate these first ten days of Mass in Economics?
– There have been signs in tax matters, but for now we have not seen concrete things. They exchanged the debt for pesos but we still don’t know what will happen to the rates, how deep the spending cuts will be, the rate size increases, if the consumption limit is monthly or BIMESTER. What is clear is that the impact of subsidy cuts will be almost zero this year and more important in 2023.
Then came the super rate from the Central Bank …
– Which is a phenomenal tourniquet. In this context, the super rate is not the medicine I like best because it does not replace a coherent economic program. But hey, today is an attempt to stop the bleeding. We will see. Very little is also known on the external front. I see a lot of willingness to keep betting that when the winter is over, energy imports will decrease. But the most important issue is the settlement of cereals. And since there are hundreds or thousands of manufacturers, you can’t squeeze them. You have to give them the right incentives. And that incentive is a number, a dollar price that closes them. The government knows how to squeeze but not seduce.
“Negotiation with cereal companies implies having dollars today that will be missing tomorrow”
Can the deal work so that grain companies advance dollars?
– It can be useful in the short term. But these are dollars that you will have today and that you will miss tomorrow. What matters is to convince the owner of the grain that it is in his interest to sell. And that today is difficult with this kind of change. Explained by the absurd, this government would need all productive sectors to be monopolies, to sit them at a table and squeeze them. But the reality is different. There are many manufacturers and they fail to convince everyone. They have no answer for this.
– Speaking of the super rate of the Central, you say that it is a very strong medicine, you do not like it but is it necessary for this moment?
– I’m not going to say it’s not up to par. I don’t like raising interest rates as a central tool of a policy. Now, when you don’t have the rest of the tools, you can use it to narrow the gap a bit. But while the Central sets the rate close to 70%, there are banks that, in exchange for some official compensation, continue to lend in pesos at 45% or 50% for some subsidized line. It’s a contradiction, it won’t work.
– Does this mean that the producer continues to finance himself in more or less cheap pesos instead of selling his cereals?
That’s what my customers tell me when I ask them if they are going to sell merchandise. “I would sell it but I prefer to borrow at 45 or 50%. And it happens to everyone. The one that has a maturity, a debt, whatever, but we continue to discuss the specific case. I repeat: completeness is lacking. And integrity must be complete. be applied when a government starts. Not now. Here the government got off to a bad start on December 10, 2019. Then came the pandemic. When the pandemic broke out, the situation was totally underestimated and the problem began to slip away. agreement with the Fund was useless. The survival manual to last and arrive was not applied. Today we suffer the consequences. We have gone to war since the pandemic. And the truth is that the war and the increase in international prices do not fa was the cause of this acceleration in inflation Energy became more expensive, but it favored export prices, which were offset.
– Could this central bank rate serve to cap alternative dollars and at the same time help curb inflation?
– I think the goal of all this is to see if the dollar improves with liquidation, if the gap from 120 to 100% decreases a bit. The million dollar question here is when the farmer will be resolved, and whether the market will force a devaluation or not when the reserve strengthening negotiations are completed.
“If the market remains negative, the devaluation will be inexorable”
– The question is whether reserve strengthening is continuing to sell dollars at 130 or much more expensive?
– If the market remains negative, devaluation is inexorable.
– Is there no intermediate station, for example an official split?
– The formal split, if there is one, has only one reason for being, which is to decide whether credit card and tourism expenses are subsidized or sent at a higher dollar.
– Isn’t that a marginal problem?
– No. That’s 600 or 700 million dollars a month, almost 8,000 million a year. But I insist. The problem of the loss of reserves, like that of inflation, is a macroeconomic problem. Cover that hole and another one is discovered in the future.
– If you had the pen, where would you put today’s gear?
– I answer him but thinking about 2024, when a government that has a global plan will start. A logical change, if the delay became superfluous in the last two months had not been made, I would say it would be between 170 and 180 pesos, and correcting with inflation, of course, because inflation will not stop overnight for the other
– Does the devaluation imply a complete transfer to prices or are there products that are already referenced in the liquidation box?
– I think today the products related to imported inputs take as reference a dollar of $ 180 or $ 190, like fabrics, cars. The ones that aren’t $ 180 and will go up are food, of course. And there is the whole service sector that would depend on the salary and the trade union negotiation that yes, of course, if the salaries increase, they will increase.
Rodolfo Santangelo economist. Photo: Federico Imas
In any case, a devaluation by itself does not solve anything, if, as you say, it is not applied in the context of a complete and, above all, credible program?
“Devaluing is like entering the operating room, you have to be prepared because the operation cannot go wrong”
You must understand that devaluing is like entering the operating room, you must consult the doctor, the cardiologist. you have to be prepared, you have to do the pre-surgery. It is a delicate operation and must be done well. But this government doesn’t want to do that. They did so in 2014, with Juan Carlos Fabrega at the Central Bank. And since they lost in 2015, they now don’t want to repeat it so as not to lose again in 2023.
– Could it be that the government will try to win in 2023? Or maybe they are aware of the problem and prefer the bomb to go off on someone else?
– It could be a possibility. What happens is that the biggest enemy against them is that there are 16 months left. It is a long time to walk the tightrope.
– If this continues, the government also loses. If they also apply orthodox measures?
-With orthodoxy they will not win votes. But if they are unorthodox, inflation picks up speed and travels at 150% per year, which also causes them to lose votes. The road is narrow and winding.
– So what does Massa have within his reach for the government to fulfill its mandate and to have some electoral chances?
The goal is to implement a program that, with insubstantial measures, will lower inflation by 9 to 6% per month. It is not much more. The most they can hope for is to save themselves from relegation.
What would you save from relegation?
– Hand over the baton to another and don’t leave prematurely.
– And for the vice president what could be the joy?
– Without speaking of judicial matters, which I am not following, I imagine that she will end up as a senator in the Province of Buenos Aires. But it seems to me that the plan that the ruling party has is that Peronism does not disintegrate like the UCR in 2001.
“The next government has no more than 100 days to create the conditions that will allow inflation to reach 10% or 20%”
– On the way to the end of the mandate, and with the measures that Massa is taking, who will suffer the most, the employee or the one who today is the beneficiary of a plan?
– So far the big loser is the pensioner who, by his own situation, does not go out to claim. The beneficiary of the social plans takes to the streets to make more noise, defending what he has. The formal wage earners will have their union to defend them. Obviously he will lose who, as the case may be, will have to pay more for the services. The one who may have difficulties is, as up to now, the unregistered wage earner.
-Can there be some disruptive event with the pesos debt of both the Central Bank and the Treasury? A bonex top?
– It is known that the debt in pesos is not paid. is renewed. We need to see under what conditions. The main support of the debt roll-over is that there are exchange controls and an expansionary monetary policy. Eventually someone renews. I believe this will be a question for the next government, which must have a global vision. The number one condition for avoiding a disruptive episode is that it must improve flows, lower the deficit and lower inflation. Will it be enough? I do not know.
– What suggests to you that Massa has not yet been able to appoint the Deputy Minister of Economy?
– It is clear that there was something prepared and armed in advance to disembark. These are the decisions that are made with courage when the situation gets out of control.
– In terms of grant cuts, do you think what has been announced is sufficient or should they have been more ambitious?
– It is an excellent first step because it politically whitens the mess in the energy and tariff policies of the last 20 years. It is not enough, it is the first step. Transport is missing. But the important thing is that it has been disqualified that the services to be given no longer exist. We cannot continue with the joke that when the temperature drops by one degree, the energy demand increases by 6%.
– It is said that you have to find a narrative to convince people of the need for an adaptation. Where do you think that fiction should go?
– The narrative must be given by the political leadership, which must show a horizon that gives meaning to the measures taken. Obviously getting people to pay more will be tolerable as long as you’re not giving away money elsewhere. This is where the narrative falls apart. Now, if the rate hike is put into a sensible program, with the aim of lowering inflation, it will be possible to apply it. Let’s not forget that Macri won in 2017 after applying strong rate corrections.
– Today a video circulates among politicians in which former Israeli prime minister, Shimon Peres, tells how he defeated inflation. How long will it take inflation that travels 100% per year to reach, say, 10% per year?
– I believe that the next government has no more than 100 days to create the conditions that allow inflation to reach 10% or 20%. The next president has no room for higher inflation, neither 40 nor 50%
“Can this be achieved in such a short time? I thought you would tell me that it would take at least 3 or 4 years to bring inflation down to 10%.”
– You can, why not !. With a serious schedule. The era of gradualism is over. A sensible and credible roadmap is needed, which must be respected. We need to make a vigorous regime change of economic policy. non-isolated measures.