The way to understand it can be simple, since there is a current ecosystem where two inertias coexist with which you want to break: a decreasing demand for pesos and another, a growing demand for Dollars officers. The promise of spending cuts launched yesterday seeks to break a behavior that has been deepening the crisis: the greater fiscal deficit financed by force of issuance and public debt, pushes, in turn, a greater inflationary impulse, which promotes and deepens, feeding back , the forces described.
What does not add, subtracts
In Creole, in the absence of dollars to compensate for the exchange equation, with the deficit more is issued than what is not demanded, pesos. Therefore, the price of that asset, in relative terms, falls, giving it a higher price (rate) for those who are willing to keep that asset over time (investment).
Thinking in dollars, this movement, which is aggravated by the payment of the energy import bill (fewer dollars, fewer reserves, etc.) not only deepens the above, it also encourages behaviors that make it even more problematic, such as , all the speculative operations to extract official dollars from the BCRA by economic actors.
As was said, Massa’s measures seek to break the vices of this equation under a concept linked, above all, to the monetary. And they seek it in different ways and in differential degrees. There are measures to reduce public spending both from the symbolic (expectations) and from the practical (issuance and assistance from the BCRA). But also, to reduce the intensity of the two underlying forces, the drop in the demand for pesos and the increase linked to official dollars. They are approximations, first movements of a more complex painting. The minister thus appears to be approaching a kind of ranking of problems, with a monetarist reading of the inflation issue, without neglecting the dialogue tables. He also seeks to break the inbreeding of the imbalances that can be thought. But surely, if it prospers, others will come later to complete the task.
monetarist translation
In the latter sense, the entire device has translation. Compliance with the 2.5% deficit goal established by the budget, the limit on Treasury Advances for the remainder of the year, the freezing of the state plant and the tariff policy (less subsidies, fewer pesos to finance ), deserve the reading of the fiscal order, therefore, a signal for the expectations of the holders of pesos. Along these lines, the reorganization of social programs could also be noted.
The same for those who look at dollars and reserves: the promotion by DNU of regimes for the sectors of agribusiness, mining, hydrocarbons due to increased production, and the knowledge economy, the control and denunciation of under-invoicing and over-invoicing in foreign trade . Also, the advancement of exports with the value chains for a total of 5 billion dollars, which will go on to increase the reserves of the BCRA.
emerging directions
There are dozens of routes that can be tried to interpret what the minister wants to do. But one could think of a scheme where not only the demand for pesos will be promoted, but also funding will become more expensive (displacement effect) and therefore the brake on economic activity will deepen, understood as necessary (from orthodoxy) to demand less dollars to the BCRA for imports.
As the minister said, the measures ooze in the short term because in the medium term, the expectations are different. In fact, some might say that in the future Vaca Muerta and the gas pipeline can be expected to provide additional dollars and energy prices to fall, which would lower the demand for foreign exchange.
Source: Ambito
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