Borges was right. That preference for the decimal system – and for the dollar – should not persist. Arbitrary at the end of the day, the analytical cut of the first 100 days of government of Javier Milei It can be the perfect excuse to talk about the next 100 days. It is there – and not backwards – where the keys to a course that is committed to “cultural transformation” are found, as the mega-advisor usually states. Santiago Caputo but that, along the way, has stopped at other no less relevant aspects of the national socioeconomic reality.
Synthetic, and leaving the analysis of political matters on the way –the DNU, the new omnibus bill and the preference for conflict as a methodology for the accumulation of power-, the Government’s vox populi bet is to turn off the tap of the fiscal deficit in the hypothesis that, since it is an eminently monetary phenomenon, Excess public spending generates emission and, later, inflation. The reverse path is easy: less spending, less deficit… prices should trend downward. Add to that another important element: with interest rate cuts and a contractionary monetary policy (M3 over GDP is at historic lows), the lack of pesos should appease – sooner or later – the rest of the inflationary tensions. With fewer pesos in circulation, coin competition becomes easier.
Deindex at any price
For the rest, and as part of the sought equation, The economic recession is turning into a depression.while the bet seems to be that the increase in unemployment ends up disciplining any attempt to negotiate parities above what the Government deems appropriate. The deindexation of the economy is launched via retirements and salaries, with a stick.
However, and always trying to interpret the economic program that the Casa Rosada has in place, There are at least two dynamics – in addition to the dramatic social situation and the erosion of salaries – that could bring about the proposed scheme..
Dollar, devaluation and IMF
The first is the dollar: The Government debuted with a devaluation that proposed a 118% jump for the dollar, but the impact of this and other measures was cutting off the “competitiveness” of that exchange rate parity. to the point that in just over 30 days it will be, in real terms, with one dollar, again, at the same levels. Although the BCRA was adding reserves until it exceeded US$ 10,000 million of the accumulated amount (they are still negative), this could lead to a new devaluation that once again generates an inflationary flash. There is something there that has not been said until now: The IMF has insisted last week that, to facilitate the remaining US$15 billion of the program, which could promote exchange rate unification and the lifting of the stocks, the BCRA must reposition the quotes. Without devaluation, there are no dollars. The real exchange rate is already below that recommended by Georgieva & Co. With an administered devaluation that pedals at a speed of 2% per month (crawling), inflation moves to 15% leading to rapid appreciation. This diagnosis even applies to effective exchange rates higher than the official one, such as without the importer (PAIS tax amount of 17.5%) and exporter (80% at the official-20 CCL). The same applies to a sector of agro-exporters, who are evaluating the next liquidation.
Recession and new adjustment
The other failed dynamic is that of zero deficit. By seeking to take pressure off the inflation generated by the devaluation and the rearrangement of relative prices, Minister Caputo has induced a recession which is in the process of becoming an economic depression. The resulting is a drop in the level of collection which logically adds a challenge to the Government every time it wants to register a new financial surplus. In fact, the Government must make new cuts and adjustments to accommodate lower tax revenues. What future can this equation have if the Government must transfer the resources that correspond to the provinces and that have served them until now to reach the surplus? What surplus will the Government be able to achieve if it must, sooner or later, transfer resources to retirees and pensioners who until now have represented more than 35% of the adjustment made?
President Milei has shown himself to be a different politician, a rare bird that permanently seeks to embellish itself in an anarcho-capitalist ideology, but he has no method or, in any case, he professes all methods: any method is good for him as long as he gets what he is looking for. It is an open-air experiment that has the approval of a sector of the political leadership – aware that the public accounts had to be put in order – but that does not know how far it can go in that stubbornness that is, in the words of the president, disarm and defund the State, but from within. Ultimately, the ultimate objective is clear: the decline of the welfare state or what little remained of it in a country with serious problems of poverty and inequality. That is another of the questions that the future raises.
Source: Ambito
