The dollar loses purchasing power

For those who want to measure inflation, the stock dollar or MEP and the blue dollar since Alberto Fernández took office, inflation was 123.5%, the blue dollar rose 167.5% and in the stock dollar or MEP 169.2 %. Start buying some asset, because you have been losing the gap you gained for a year.

The assets of Argentines abroad as of December 2021 total US$ 417,507 million, of which only US$ 39,662 million correspond to the reserves of the Central Bank. Investments in portfolios abroad add up to US$80,460 million and direct investments add up to US$42,452 million, in both cases they are amounts that are tied to a business that could have more profitability than market inflation, however, there are U$S $S 254,932 million that are under the heading of other investments abroad, but that could be dollars housed in a safe deposit box.

It is estimated that Argentines would have close to US$200,000 million sleeping in safe deposit boxes (joint) or fixed terms abroad at rates not exceeding 3% per year. This implies that the universe of said money is losing purchasing power, not only in Argentina, let us remember that the United States has a retail inflation of 8% per year and wholesale inflation of 10% per year. Having tickets, of whatever nationality, is no longer a good business. The world has entered a period of high inflation and it remains to be seen whether the probable peace between Ukraine and Russia will stop the rise in prices.

In Argentina, the monetary policy of having inflation in dollars leaves us as a result a rise in the GDP in dollars that helps distort the national accounts. The GDP, measured in constant currency, grew 10.3% during the year 2021, however, if we measure the GDP in dollars as of December 2020 it was located at US$ 326,956 million and in December 2021 it is located at US$ 454,377 million, which represents an increase of 39.1% in dollars. Be?

The rise in GDP in dollars to levels of US$ 454,377 million does nothing more than show that the backwardness of the exchange rate in our country favors the exposition of some goals committed to before the International Monetary Fund. For example, our debt in dollars measured as a percentage of GDP, it looks very low given the distortion shown by a GDP in dollars that grows at a rate of 39.1% per year (28.8% grows due to exchange rate delays and 10.3% due to activity).

This is not the only problem generated by the exchange delay. In the current situation the government It is only financed in the market by placing debt in pesos adjusted for inflation. The debt in pesos adjusted for inflation is measured in dollars, as of December 2021 this debt was US$ 42,122 million and in December 2021 it grew to US$ 62,203 million, which shows an increase of 47.7% per year, A large part of this rise is debt placement and another is the increase in inflation well above the devaluation rate. Let us remember that in 2021 inflation was 50.9% and the devaluation rate was 22.1%.

For the first two months of 2022, the debt in pesos adjusted for inflation reached US$66,915 million, which implies a rise of 7.6% in two months, when inflation in two months was 8.8% and the devaluation rate of 4.6%.

For the remainder of 2022, we believe that the government would seek to place an additional US$10 billion of debt adjusted for inflation, with which the debt stock would be around US$77 billion, if in the next 10 months of the year we have inflation in dollars of 20%, this debt could be around US$92.4 billion.

Based on the figure estimated for December 2022, and adding an additional indebtedness of some US$ 10,000 million and inflation in dollars of 20% for the year 2023, the government of Alberto Fernández would leave the next government with a debt in pesos adjusted for inflation of approximately US$ 122,880 million. It is a debt that is mostly being placed in the short term, and that is becoming unpayable as the months go by. This debt cannot be liquefied with a devaluation, since any devaluation generates an increase in prices in the economy.

Conclution

The debt in foreign currency of Argentina as of February 2022 amounts to US$ 251,142 million, it is distributed among creditors to whom we paid low interest rates and its amortization is very prorated over time, in the next two years 20% expires of the total stock of debt. Since Alberto Fernández assumed the presidency, this debt has risen by US$2,197 million. Buying a bond in dollars at a parity of 30% does not seem risky, the worst has already been discounted, it pays in dollars and the amortization is in the long term.

The debt in pesos adjusted by CER amounts to US$66,915 million as of February 2022, and 60% matures in less than two years. Since Alberto Fernández took office, this debt has risen by US$42,464 million. These bonds trade at parities above 100%, they are pure risk and a reprofiling is likely in the future.

The heavy inheritance for the next government will be the enormous debt in pesos adjusted for inflation that the current administration will leave, once again ordinary citizens will have to listen to the excuses of a new government that will surely have to fix what the previous one did, but if it does it wrong, it will leave us worse off than we were, just as it has been since 2011 to date.

The Argentine political class should reach a basic consensus, achieve a fiscal surplus, lower inflation, achieve a competitive exchange rate, strengthen reserves and lift. There are 5 key points to get Argentina out of decline.

In the current situation, we cheat by delaying the exchange rate, inflation is higher than the interest rate, there are no incentives to invest, reserves are low, we strengthen the stocks and we have shortages because there is no investment. If we don’t change we are in trouble as a country, if you don’t invest the dollars every day that passes you lose purchasing power.