In the immediate future, it is considered relevant that the BCRA can begin to buy dollars in the exchange market to rebuild the international reserves that today have a negative balance of more than US$11,000 million. In this sense, they understand that it will be essential to reduce the gap between the official dollar and the financial ones – ideally it should be around 30% -. On the first day, the gap was reduced by almost 34%.
Immediately, the support received from the IMF was important, although this does not imply that there will be new disbursements, which is why there is expectation regarding the advance of some US$5,000 million that the cereal companies would have committed, according to sources from the Treasury Palace, although this figure is questioned in private media. Although the current exchange rate is considered competitive, the calculations of this sector are that, At most, about US$3 billion could enter immediately.
In addition, they point out a bureaucratic issue. It is estimated that the Central Bank resolutions that block the movement of foreign currency abroad total around 1,500.
Prices
How much the devaluation will impact prices is another of the big questions. Official measurements show that weekly inflation has been moving at a rate of 7%, of which December would end at around 20%. In Economy they expect these increases to moderate, although in private media it is already estimated that in January it could reach 30%. November already starts with a high floor, with a core CPI of 13.4%; Seasonal (12.8%) and Regulated 10.1%.
““The outgoing government left no less than 150% of repressed inflation that will come to light in 2024, taking inflation above 330% year-on-year, possibly in the middle of next year.”says Ramiro Castiñeira, from the consulting firm Econometrica.
That “inflation does not escape” It is central since a good part of the success of the program will depend on the degree of adjustment of salaries. Immediately, government sources indicate that They have not yet had talks with the unions. It is also not clear what will happen to the salaries of public employees. Although the Executive Branch will continue to increase pensions and the AUH, it is not known what adjustment the various social plans will have.
The CGT, which maintained a striking silence during the 4 years of Alberto Fernández’s government, this Wednesday, through a harsh statement, accused the government that “It is not the caste. The people pay for the adjustment” and announces a climate of conflict.
In this sense, it is noted that greater coordination is necessary between the Labor area (in the area of Human Capital) and the Ministry of Economy.
Adjustment
And, of course, the heart of the program is that the ambitious fiscal adjustment program consisting of higher taxes and spending cuts can be carried out. Official announcements aim to achieve financial balance in 2024 through an improvement of more than 5% of GDP.
The plan combines an improvement in collection of 2.2% of GDP (increase in Country tax to 17.5% contributes 0.8% of additional GDP, the increase in withholdings to 15% for non-agricultural products adds another 0.5 % of GDP while the reversal in the income tax and a money laundering and moratorium would give another 0.4% and 0.5% of GDP).
In parallel, a reduction in spending of 3.2% of GDP is aspired (cuts in public works, subsidies, salaries, shrinking of structures imply a joint cut of 2.8% of GDP to which is added the liquefaction effect of pensions for another 0.4% of GDP). The greatest number of doubts heard in the market are related to the sustainability of these measures.
Unrest
“We see three anchors to stop inflation. On the one hand, an exchange freeze at ARS 800 (only 2% monthly mobile parity); secondly, a strong fiscal and monetary contraction; and, thirdly, the level of activity,” he says. Javier Casabal, fixed income strategist at Adcap Grupo Financiero and raises the doubt that is shared by numerous specialists “these anchors will be socially sustainable.”
In the same way, Martín Polo, chief strategist at Cohen Aliados Financieros He states that “the adjustment is greater than expected” and it is assumed that the recession “will reduce the demand for foreign currency.” Also, he explains that “the exchange rate jump will give a greater incentive to exports, which will allow the recovery of international reserves.”
He agrees with most specialists that “inflation in the coming months will skyrocket – we expect 20% for December, 30% for January and 18% for February,” Polo estimates. Doubts
The consequences of the announcements will generate more unemployment and recession, in the context of poverty that, in the first half of 2023, exceeded levels “observed in the second half of 2001” according to a work by the economist Ana Inés Navarro from the Austral University. It should be remembered that poverty was at 40.1% in the first half of 2023. Meanwhile, according to data from the Argentine Social Debt Observatory (ODSA) of the Argentine Catholic University (UCA) In the third quarter of 2023, poverty reached 44.7% of the total population. And, it should be noted that these figures will be higher in this last quarter as a result of the increase in inflation.
Is about challenging measures, not exempt from social and political conflict. For now, it should be noted that The modification in the income tax, money laundering and the increase in withholdings must have parliamentary approval.
The summary of the current situation is summarized by the economist Castiñeira: “It is by far the worst economic legacy that a government left behind. Some inherited a Rodrigazo, others a Hiper, others a potential default. Only Milei inherited all three crises together, with half the country in poverty and the other half subsisting on salaries of $300.”
Source: Ambito
