The dollar is not behind, taxes are ahead

The dollar is not behind, the dollars are ahead taxes. The tax pressure is very high for export sectors such as agriculture, industry and others. Small and medium-sized companies are decapitalized, the rise in rates, salary increases, the stock of debt and the lack of work put them on the brink of calling for creditors. The market needs more economic activity. There are sectors that monopolize goods in the market, and their prices are much higher than international prices.

Liberals beware, in the developed world it is important that monopolies do not hinder economic growth, which is why borders are opened so that there is free competition in certain sectors. Certain products are allowed to be imported, but others are not authorized. Shall we leave it there?

The government has plenty of macroeconomics and lacks microeconomic policies to reactivate the economy. The president set his priority on the fiscal surplus and maintaining the stock of banknotes in the economy. He does not intend to buy dollars indefinitely, because to do so he necessarily has to issue pesos. The economic actors cannot understand the new economic plan, they are still waiting for a devaluation that will never come, and in the meantime the passage of time deteriorates economic activity.

The markets carried out a very important rally, since, by changing the economic regime, we went from deficit to fiscal surplus, from cycling the debt to honoring it. This caused bond prices to adjust strongly to the rise, however, today the market demands something more than fiscal surplus and no economic issuance. The market is demanding a roadmap to achieve greater economic activity.

The arrival of investments of more than US$200 million is very important, but it is also vital for small and medium-sized companies to earn money and be able to capitalize their company with new machinery, more employees and expanding their productive structure. Without starting the engine of small and medium-sized businesses, it is difficult to get out of the recession.

There is a lot of talk about the US$200 billion that Argentines have saved under their mattress, but that money will hardly come to light if we do not provide it with a path of possible business. Nobody sets up a business if they don’t know if they will make money.

The government achieved a fiscal surplus, it stopped issuing piecework, it is seeking to capitalize the Central Bank, but it did not obtain external credits that would give it the possibility of deepening the economic plan it has in place. The IMF did not provide fresh money, the Chinese want to collect what they lent, and the Arab funds never arrived. We must pay the public debt, which is a great challenge for the coming years.

Reserves continue to be around US$28 billion. The monetary base as of May 7 stood at $13.5 trillion, while monetary liabilities remunerated in pesos total $39.0 trillion, almost 3 times the monetary base. The Central Bank’s dollar liabilities total $8.1 trillion, something that did not exist on this magnitude in the recent past.

On December 7, 2023, reserves stand at US$21,209 million. The monetary base was $10.1 trillion, while monetary liabilities remunerated in pesos totaled $23.4 million, 2.3 times the monetary base. The Central Bank’s dollar liabilities totaled $1.8 trillion.

In the first months of government, the Central Bank was not able to successfully overcome the problems inherited from Kirchnerism, monetary liabilities continue to be a severe problem, the lowering of the rate did not manage to liquefy them to the expected magnitude, however, an escalation was overcome significant inflation.

The interest rate fell from 130% annually to levels of 30% annually, the fixed term stopped being a good business, economic agents look fondly at returning to the old love, collecting dollars.

Companies are surfing the crisis thanks to lower rates, which allows them to reduce the monthly payment of loans, while they wait for the economy to reactivate. Other sectors, faced with lower rates, take the opportunity to finance themselves and postpone the sale of the stock they accumulate, hoping that the plan will fail and a devaluation will make them more prosperous. There are no patriots here, this is for money.

Conclusion

. – The lower interest rate is of great help for companies with debt, for consumers who want to finance themselves to purchase goods, and for those who want to access long-term credit for the purchase of a home.

. – A lowering of rates also opens the way for speculators who hope that Argentina will return to its old ways, returning to an inflationary and devaluation path.

. – The financial market is anxiously waiting for a law to be approved in Congress, at the moment we have had two strikes and no law, if we do not discount we are going to lose by a landslide, but it seems that the legislators did not take notice, and they continue to add discredit, both pro-government and opposition parties.

. – For now and only for now, bonds in dollars and pesos adjusted for inflation remain at interesting prices, but to grow they need more money to come in, if they do not exceed the maximum levels reached, what does not go up goes down.

. – Shares have improved in recent days, but be careful, because the balance sheets are not a paragon of virtues. We do not see sustainable profits over time in many companies, as long as the economy does not reactivate.

. – People want to return to their old love, the dollar. Today it is not a business to accumulate dollars when the rate in the United States is at 5.0% annually, inflation at 3.6% annually, and between both concepts we lose purchasing power. Dollars must be invested in bonds, stocks, properties, merchandise or whatever allows you to sleep peacefully.

. – We are changing the economic regime, in Argentina and in the world. In Argentina the government is right when it says that it is making a great effort. The private sector is right when they say that they do not deserve so much recession. The ruling party and the opposition speak without listening to each other, in this way there will be no laws, instead the strikes will continue. This way we don’t reactivate in the second semester, we all have to reflect.

Financial analyst