The hallmark of this time is the resignations that precede appointments. And something else: a non-stop journey from dogmatism to the land of pragmatism. As Twain said, you have to travel to learn. The surprise will be seen further down in this note. They talk about the dollar. The futures. But also, not only the name that is saved for the Central Bank. Also the idea that he expressed Luis Caputo before the banks: exchange Leliq for bonds with longer terms and lower rates. This entire package, with a guarantee with the assets of ANSES and YPF. It also adds a new Budget that brings a fiscal adjustment of 5 points of GDP. Will there be a surprise dollar?
Sturze, Reidel, Caputo, Quirno
The elected government is assembled in the open. Muted spectators, those who orbit around the small table of power, do not express an opinion on the matter and leave, here and there, the residue of disbelief. Everything is a manufacturing of expectation in the mileist environmenta gear that does not stop because it senses that what is coming is cooking right now.
While Javier Milei walks the New York soil alongside Luis “Toto” Caputo and Nicolás Posse (future Chief of Staff), an unsuspected force is putting together the loose pieces, here in Buenos Aires. The starting data refers to a possibility: there will be a new president of the Central Bank. It will not be Federico Sturzenegger, nor will it be Demián Reidel, his alter ego. It is proposed to think of another formula unfolded during these hours.
The first equation, that it be directly “Toto” Caputo that takes control of the Central Bank, which would constitute a “guarantee” for the banks. Guarantee of what? That there will be a careful procedure, a kind of Fair Prices, in the disarmament of the Leliq, something that the financial entities had begun to do on their own and that put Milei on alert. This unwritten agreement – but verbalized last week at a meeting – also includes the rejection of dollarization. During these hours, that pact between the future government and the banks is settling. The “solution” consists of improving the balance sheet of the Central Bank to the detriment of the balance sheet of the Treasury.
Patience. The game of chicken
Strictly speaking, the banks watch. Toto Caputo asked them for patience, to stop migrating the Leliq pesos to the BCRA’s one-day passes, in the short term, because that generates the perception of systemic risk. To take a dimension, the stock of Central Bank repos already exceeds that of the Leliq: estimates show that the total of repos that expire in one day already amounts to $13.1 billion and that of the Leliq, at 28 days, is of $10.6 billion. Chan. That’s why the trip. To look for dollars and support the promise of a set of tools that helps disarm Letters.
From the unfolded formula, the second point, which also has a chance. That, instead of “Toto” Caputo, the one who becomes the owner of the Central Bank is someone from his team, an intimate, but also someone who reports to Mauricio Macri. The name chosen is Pablo Quirno, a piece belonging to the environment of former president Macri, but also a Caputo`s boy. Quirno spent 15 years with JP. Morgan but he is remembered – the verb is excessive – for his role as General Coordinator of the Finance Secretariat of the Ministry of Finance and Public Finance in 2016. In 2017 he was Chief of Staff in Toto Caputo’s Ministry of Finance . In July 2018, he joined the Board of Directors of the Central Bank. He resigned three months later.
WashingtonIMF and fiscal adjustment
We return to the trip. The one we consign from dogmatism to pragmatism. The trip of the president-elect, who will also arrive in Washington, where he will hold formal meetings with the IMF, the US Treasury and the White House to disseminate his economic plan: all-terrain deregulation, fiscal adjustment, monetary reform, and State reform. Linked to the budget, the accounts managed by the president-elect’s team show that the primary deficit would close at 3% of GDP, plus 2% for debt interest, that is, a fiscal deficit of 5% of GDP in 2023. To that than adding the Central Bank debt for the equivalent of 10% of GDP.
What is President Milei’s small table thinking about? According to sources, they point to public works that represent 1.7% of GDP and that could be reduced to a minimum. Also to economic subsidies (which counts for 1.9% of GDP), transfers to provinces (equivalent to 0.7% GDP), the deficit of public companies (it will be proposed to privatize them, since it assumes a cost of 0. 8% GDP), among others. Of course, some of these cuts will be mitigated by the income of an additional US$20 billion from exports equivalent to 1.5% of GDP and a drop in the amount to be paid for energy imports for the construction of the gas pipeline.
Hello Kristalina, I have superpowers
Let everyone remember that Milei had his first “official” conversation with Kristalina Georgieva last Friday and there he was in favor of adjusting public spending and moving forward with an appropriate monetary program. Although it was not mentioned, the Milei teams indicate that the possibility of fresh funds from the IMF will be explored: They speculate that there are about US$15 billion left in the IMF – if the negotiations are channeled and the old standby is revived, which could be allocated to a stabilization plan. The other alternative is to renegotiate the entire program. Are two key laws coming to Congress? Revisiting old times, consulting experts from those years, The recommendation for President Milei’s team is to work on an economic emergency law and a State reform law. They seek that the elected president could have superpowers.
Finally, the dollar
The arrival of Luis “Toto” Caputo to the libertarian ecosystem and the departure of Emilio Ocampo liquefied the possibilities of dollarization in the short term. That helped moderate exchange rate projections. The fact to keep in mind is that, philosophy, not everything is the same. For example, the future dollar market priced a 123% devaluation for the start of the future administration.. The contracts traded in futures for December 2023 assigned an official dollar value of $800, ergo, a sharp rise in the wholesale exchange rate is expected for the beginning of the new administration. For January, contracts were traded with one dollar at $918, and February, one dollar at $1,015. How can the blue dollar react if this advances?
Source: Ambito
