Sergio Massa’s diagonal is still on the bench to avoid a devaluation

The commotion about the attack on the vice president Cristina Kirchner it covered the spirit of the Argentines and opened hours of indeterminate reflection on the future and political evolution of the country.

But the economy continues to set milestones based on the results of Serge Massa in his first month of management as Minister of Economy he strengthens himself.

The inflation August leaves no room for celebrations. According to private estimates, the cost of living would have increased between 6.5 and 7%, consolidating the forecasts of a triple-digit increase for next year.

From the start, Massa said he would not devalue the peso against the official dollar (the wholesale price is $ 139), keeping his predecessors’ policy of arbitrarily adjusting the exchange rate. A) Yes, the official rose 5.3% in one monththat is, below inflation.

The exchange balance August was again negative for the Central Bank by $ 520 million, due to the fact that in the first 7 working days it ended up selling $ 836 million and in the remaining 15 days it ended up buying only $ 316 million.

The minister is trying a diagonal with agricultural exporters with an “incentive for the pre-financing of exports by opening a dollar account host these credits in local banks in exchange for a return that it would cover the cost that grain companies have to pay to borrow abroad while the non-obligation to liquidate dollars in the official market eliminates the exchange risk “, reads a report that the consultancy firm Equilibra has distributed among its clients.

Judging by the first results, the scheme did not generate much enthusiasm: They expected to get $ 5,000 million and would get something more than $ 500 million.

To avoid write-downs due to the risk of generating another one inflationary flashthe minister with his diagonal runs to incur buy more “expensive” dollars. to sell you more “cheap” what would be the economic absurdity of a scheme of “dollars tailored” to the needs of the reserves of the Central.

The objective of increasing reserves foreseen in the agreement with the International Monetary Fund for September is almost impossible to meet to the rhythm of the purchases of the last days and that is why that is taken for granted Massa will ask Kristalina Georgieva for a waiver.

By the end of this month, Argentina is expected to increase its net reserves by $ 4.1 billiona practically unattainable figure even when the restriction on imports, which has intensified in recent weeks, becomes more pronounced.

The path taken by Massa at the beginning of the containment of imports with an inflation of 90% per year which consists in the fiscal adjustment and in the lowering of the real income of the people and in the increase of the interest rate causing a decline in economic activity.

If the trading scheme is based on the promise that there will be no leap but the markets are wary thinking that the dollar is behind (an estimated delay of 10% to 30%) and companies doubt whether they can pay for their imports in official dollars, the price becomes unstable: the benchmark dollar would become one higher than the wholesale dollar. Uncertainty has costs.

Also the benchmark interest rate of 69.5% per annum, 5.8% per month it lagged behind inflation with which it loses strength as an incentive for producers and exporters to sell cereals to maintain pesos that depreciate due to the price rush.

DoRates will go up again of interest after official August inflation data is known?

Economic rationale in times of uncertainty indicates that interest rate revenues in pesos must exceed the change in the dollar to facilitate the liquidation of exports, but for the government this comes at a significant cost.

The burden of interest on the debt in pesos of the state begins to be a source monetary issue very important and almost unstoppable in the case of continuing to deepen the scheme that comes from further afield, but which has been pronounced since the assumption of Massa as “super minister”.