The economic scheme could be finding its own limitseconomists warn. Thus, the liquefaction which was a fundamental basis to achieve the fiscal surplus and heal the BCRA balance sheethad its correlation with the decrease in inflation, but also with the worsening of the recession. At the same time, the official exchange rate sustained with the crawling peg at 2%turns on the alarms exchange delay and the difficulty for The agriculture liquidates in magnitude so that fresh dollars enter.
In dialogue with Ambitthe Economist Amilcar Collanteone of those who pointed out that the current model would be encountering obstacles in its own structure, detailed what he believes are the obstacles that Caputo would face: “The limit of liquefaction is the depth of the recession. While The ceiling of the negative real rate is the gap. And finally, the limit of the crawling peg of 2% is the exchange rate delay and the risk that the agricultural liquidation and BCRA purchases will be stopped.”
Liquefaction and recession, Caputo’s limits
“There is a framework that, for the sanitation of the BCRA, The economic team resorted to the liquefaction of remunerated liabilities and monetary liabilities are also included. That is to say, They greatly reduced the purchasing power of the pesos in circulation and also the savings of depositors (in local currency) . This results in recession,” he explained in dialogue with this medium.
A macro-financial analysis carried out by Balance maintained that The stock of paid liabilities went from representing 5.7% of GDP at the end of April to 3.5% in May. Of course, if we take into account the stock of contingent liabilities (the puts that were offered to banks and that have not yet been exercised) the fall is smaller, from 8.7% to 6.8% of GDP, in said period.
Regarding the recession, the Monthly Economic Activity Estimator (EMAE) This week he confirmed it. In March 2024, the EMAE registered a 8.4% drop in the year-on-year comparison, according to data from National Institute of Statistics and Censuses (INDEC). So, nine sectors of activity that make up the index recorded decreases in March year-on-year.
Crawling peg and agricultural liquidations
“On the side of crawling peg of 2%, with high inflation that was 8.8% last month, is far from converging to 2% in the very short term. Undoubtedly the dynamic is the appreciation of the exchange rate. And this has consequences on the reserve accumulation strategy and impacts the liquidation of exports.“, Collante expanded.
A report of Wise Capital maintains that “although the Government expected a greater income of dollars during the heavy harvest, it did not generate conditions that were more attractive for the countryside.” The settlement for May would be at levels similar to those of April, at around US$1.9 billion.
“This impacts the level of reserve accumulation. Between Monday and Friday, The BCRA could only buy US$550 million, the lowest amount in the last three weeks. The main determinant of the evolution of the wholesale dollar will be the liquidation of agriculture. The Government needs to start accumulating reserves for the next debt payments,” the same report indicated.
Negative rate, gap, and end of the carry trade?
The last point of Collante’s analysis maintains that the negative real interest rate occurs because “the Government is overusing the stocks.” “Although the pesos are cornered, if you lower the interest rate very sharply, the economic agents are almost indifferent between crawling and an effective rate of 2.5% monthly, and instruments in pesos are no longer attractive, which is why portfolio dollarization occurs.
“The rate cut pulverized the carry trade, the limit to the drop in interest rates is the increase in the gap”said the economist.
Fiscal surplus: is it sustainable over time?
According to a report carried out by the consulting firm Romano Group, a large percentage of expense adjustments were mainly due to liquefaction or non-payment (CAMMESA) and the indexation of pensions in areas with low purchasing power, which is why the Government points towards a May Pact (in another month of the year) that, together with the Bases law and the fiscal chapterallows you to have greater tools to overcome the upcoming challenges in budgetary matters.
“These challenges are based on the sustainability of the adjustment, exchange blender for comprehensive and consensual reforms. It will not only be crucial in the future of public accounts but in the entire economy as a whole.“, they concluded.
Source: Ambito
