The data is that the organism’s mission has just left the country without demonstrating about the particular “turn in the air” executed by the Palacio de Finance. While the IMF expressed its optimism after meetings and accused a dialogue “highly constructive and positive “, There were no details about the measures taken in the last hours.
In fact, the Government has just adopted a tools that generated uncertainty between local market operators and Wall Street investors: this is, instead of yielding to the demand for a direct adjustment of the currency, Milei and Caputo They had an improvement of the exchange rate in a sui generis formatthat is, with huge doses of heterodoxy – not liberal – where I look at it. Thus, they applied an indirect mechanism to improve the effective export exchange rate through a decrease in agricultural withholdings, exports taxes.
This movement, which translates into a reduction in the taxes paid by agricultural producers for their exports, seeks to shine, in some way, the hard conditions raised by the IMF in its last mission. The “exchange delay” is an observation that the agency makes to the government since the mid -2024 to what adds the lack of incentives for the accumulation of reserves in the Central Bank. The immediate reaction of investors was good: despite global volatility, the news caused a decrease in alternative dollars. The Blue dollar is located in the 1,230 pesos area, while financial dollars such as the CCL and the MEP also showed drops at approximately $ 1,150, driven by the expectation of an increase in currency liquidation of the agro -export sector.
A play to calm the waters and avoid the IMF
As in advance in this column only a few days ago, The fiscal devaluation that the government wants to promote is underway. The decline of internal taxes to vehicles is only a marginal part of what they plot in the Casa Rosada. The doubt, of course, is how to compensate for the loss in collection, guaranteeing the fiscal surplus.
But it is convenient to think about it in another way. Milei and Caputo’s plan It is not just an response to exchange market pressuresbut a strategy designed for momentarily escape the conditions imposed by the IMFthat throughout the week he pressed for an urgent devaluation of the weight as a condition to advance with the new agreement. As stated, the fund withdrew from Argentina this week without clear definitions, leaving the Milei government with space to maneuver, but also with a pressure on its shoulders to present concrete results. Is a victory for the Government the silence of Kristalina Georgieva?
Someone could even read what happened in another way. On the one hand, the modification of retentions to agricultural exports, although it does not imply a formal devaluation of the weight, does generate a direct impact on the real exchange rate that exporters perceive. That is, to improve the agro -export exchange rate without being translated into an official devaluation of the weight. On the other, The Government would have sought to give signs that it is meeting the expectations of the IMFbut with a tax cost content, without falling into the direct adjustment that the agency requested.
However, the government play has no zero cost. While it is designed to calm exchange tensions and take a breath to agro -exporters with the expectation of greater currency liquidation in the short term, I would only get temporarily Indirectly avoid the hardest demands of the IMF.
The fiscal cost and signals to the IMF
The reduction of withholdings implies, according to official calculations, a fiscal loss close to 800 million dollars, which represents only 0.13% of GDP. However, from the Ministry of Economy they point out that this cost is content and is compensated with the highest automatic transfers to the provinces and with the positive impact that the improvement in currency liquidation will have on public finances.
The truth is that, although the measure is presented as a temporary relief for the agricultural sector, it also raises a dilemma in terms of its long -term effects. The IMF will not easily forgive a mechanism that, although effective to dodge devaluation pressure, It shows that the government is looking for indirect ways to meet the accumulation goals of reserves without having to resort to the official devaluationas the agency had requested.
The IMF mission: without definitions and without solutions?
The fact that the IMF mission has left Argentina this week without clear definitions about the steps to follow Leave in the air the question of how the next stage of negotiation will be resolved. While the government opts for alternative measures that do not compromise so much fiscal stability or monetary policy, doubts about how IMF’s expectations will be aligned with the political decisions of the Executive remain the main point of conflict.
In fact, although the government continues to affirm that its objective is to eliminate agricultural withholdings by 2027, the fiscal cost of that measure, which would imply a decrease of additional 8,000 million dollars, still seems distant, and depends on the country’s ability to generate fiscal surplus and accumulate reservations through alternative mechanisms. In this context, the strategy adopted by the Government, that is, replacing the devaluation of fiscal devaluation (cutting taxes or adding resources), will be a central issue in the coming months, since the Executive must continue negotiating with the IMF, while maintains the balance between market expectations and agency’s demands.
Source: Ambito
