“The program with the IMF is very humble compared to the level of inflation that Argentina has.”
– Inflation was 7% in August, how is this going?
– If we don’t break the indexing inertia, we will continue with rates of as low as 6% per month. Not only is 7% in August very high, but seasonally adjusted inflation is 7.4% and exceeds 8% net of food and energy. We are experiencing a very positive impact effect for Argentine assets due to the arrival of the Minister of Economy Sergio Massa, because we came from an acceleration of the crisis that began on June 8 with the drop in demand for peso. And it is very good that the FdT shareholder who opposed the agreement with the IMF is for the first time behind a modest economic plan which is the program with the organization. But…
– But …
– The program with the IMF is very humble compared to the level of inflation that Argentina has. It is not a stabilization plan, but what it mainly seeks is that the imbalances do not increase and thus avoid a serious crisis. But even if everything is done right a heterodoxy-intensive stability program will likely be needed in February or March.
– So the plan with the IMF is to last?
– We need disbursements from the Fund. There would be another scenario if the spins on those dollars were cut. But meeting or not following the schedule, we will still have problems.
– Does the plan with the IMF therefore provide more of a limit than a ceiling on inflation?
– I don’t dare say a plan but I’m sure of it don’t put a roof on it.
– How are we today, will 2023 inflation be greater than or equal to the current one?
– Higher than the annual average. But point-to-point in December next year could be similar to that of the end of this year.
– What image stabilization program?
– One that will require a lot of technical talent and supremacy of heterodox thinking.
-What do you mean by heterodox program?
– A drawing for break the inertia inflationary, with a certain degree of freezing on certain variables e adjustment immediately. Southern Plane Type.
– What about political support for that? Because those attempts have failed over time for not sustaining adjustment over time, right?
– That’s right. There was evidently political support when they saw the abyss in the Frente de Todos. Máximo Kirchner voted against the agreement with the IMF and today the only plan he has is the agreement with the IMF. There are doubts about its degree of compliance, especially when the tax adjustment involves stepping on the corns. There will be tremendous social pressures that will come to lift the foot that stops public spending.
– There is a rise in rates, the impact of rising interest rates, tighter restrictions on monetary financing of the deficit and access to the dollar so that the Central Bank builds reserves at the levels required by the IMF. This doesn’t seem to be good news for the level of activity. How will La Cámpora do it?
– The activity level is fine. There was a slight slowdown in July and stagnation in August. But what you say will result in a decrease in demand in the future. In the first seven months of the year, the economy stagnated at a good level of 7%, higher than the pre-pandemic level. But the economy will languish between now and the end of the year and we believe that GDP will grow by an average of 3.6% over the year but with a negative brake that mortgages 2023.
– Are you concerned that the soybean dollar measure will further deteriorate the Central Bank’s assets? It implies more inflation in the future.
– There is something that worries me a lot and another little. Let’s start with the second. I care little about the BCRA’s net worth. If we already have assets where, if we value at the exchange rate, we have $ 57 trillion in non-transferable bills that are a boon. So I’m not worried about going from negative net worth of $ 4 billion to $ 5 billion. I worry about the monetary consequences of these temporary sector devaluations which I believe must necessarily continue because the dollars that will be obtained in September will be lost by selling in October, November and December. So, back to your question, I’m worried about the monetary program. The average base rise is moderate and there was a sharp slowdown in August, but over the past 30 days BCRA’s remunerated liabilities increased by $ 1.68 trillion. We are in a stock of liabilities of $ 7.9 trillion, which with a monthly interest rate of 7% is $ 550,000 million per month of quasi-tax when the goal with the IMF is $ 1.7 trillion. The three-month quasi-fiscal deficit is the fiscal deficit for the year. I am also concerned that we will be issuing $ 60 or $ 70 billion per day and we must position Leliq to absorb and maintain certain monetary behaviors. The problem today is not the excess of pesos but the drop in demand for pesos. We have before us a reduction in credit to the private sector to finance the Central Bank and the Treasury with massive private deposits that will help the level of activity fall.
– Where is the Mass game played: dollar, inflation, CFK support to sustain the adjustment over time?
– It is played on multiple fields. It won in the first with the good impact on Argentine assets and the reception in Washington. But now he faces three challenges. That Cristina and Máximo continue to support the fiscal and monetary adjustment after the first hundred dayssee how politics in general reacts to the social discontent with the adjustment we are talking about and see what is done with the avalanche of interest on the debt that the central bank has placed with the banks.
– Is there a Bonex plan on the way?
– We’re going through a soapy throat. My impression is that the plan to get to Massa is extremely risky. At some point the economic team will try to stabilize to break the inflationary inertia because with these levels the positive impact of the minister’s arrival is diluted.
– Can the gap narrow?
– It is possible that the gap will collapse slightly if all the unknowns I mention are resolved positively. But again, many preconditions are needed. The current gap is high but consistent with the vulnerability and fragility of the Argentine economy.
– How does the rise in the interest rate that the Federal Reserve decides on Wednesday and the global slowdown affect Argentina?
– It affects us more than Brazil grow zero or what China and the world slows towards an interest rate increase of United States of America which affects us less because we are an isolated country, we do not have access to credit. Even if everything is related, right? The truth is that the world no longer carries wind in its sails but frontAs good news as it may be, it could benefit from greater availability of funds from international organizations for poor countries and Argentina.
– Budget problem, what should be followed in the discussion?
– Argentina has a budget to chew on. Over the past 20 years, 66% of the increase in public spending has been explained by decrees and increases in discretionary items. In the rest of the world, the Budget is a tool that sets the spending ceiling. In Argentina it is a rubber band and it will be necessary to see if we comply with that of 2022, which has increased spending by only 50% compared to that carried out for 2021. Is it a turning point or are we still in the game for 2023? In 90 days, will we make another budget increase by decree of the 2022 Budget? The program Massa is a let’s see, he will make his way as he walks. The difference this time is that it has a Programthat it is the agreement with the IMF that is modest, does not make us stable, but obliges us to do something.
Ezechiele Burgo
Source: Clarin
