Nothing of what they promised happened, there were no achievements or progress to celebrate. We were heading towards a macroeconomic syncope in 2018. There was no long-term course, no international reinsertion -except for the macabre indebtedness-, no progress in terms of management, any decent company would have fired the entire management of the “greatest team in the last 50 years”. They underestimated the macroeconomic imbalances that they were generating in 2016 and 2017, they chose an inappropriate economic program, aggravating the twin deficits and the rise in the inflation rate.
A slight change occurred in the international financial context, which generated a slight reversal of capital flows. As we have been narrating, we were exposed to this situation as few times in history, which is why it helped the detachment of Argentine assets. Remember that in the month of January 2018 we fell from the world. We were separated from international credit. Later, before a minimal external shock, Argentina was the most affected country, because he had let his guard down for 30 months. Given our macroeconomic vulnerability, investors who had been financing our twin deficits in January 2018 stopped doing so, but in April they realized that they were papered over with titles from a country with a negligent economic program.
The minister who appeared on his program on the TN signal, in March 2016 asking with a little sign: “Let’s not go back to the Fund”, transferred us to the IMF. Two months after denying Caputo assistance, they rushed to invite Christine Lagarde to a dinner in the vacant lot (March 15). Until that moment in the world nothing had happened to move the needle, everything was peace. For the Autonomous City of Buenos Aires, Dujovne lived in a wasteland. For that reason he paid less taxes where he received Lagarde. At the price at that time, he lived in a house for around 22,000 dollars, in almost 300 covered meters with a pool in lower Belgrano (Tiempo Argentino, June 10, 2018).
– Did you always know that you were going to resort to the IMF? – We do not know.
In our opinion, the agreement with the IMF was the worst of all the bad decisions made by the Macrista government. They would impose the worst possible economic plan to correct the fiscal and external imbalance and the manifest ineffectiveness of monetary policy. With the vast majority of Argentines against going to the IMF, Macri’s re-election hinged on preventing the implosion of the economic disasters he had wrought.
With the interest rate at 40%, giving away 5,000 million dollars (offered daily) at $25 to the BCRA, with the order of assistance to the IMF, the exchange rate and financial turbulence did not stop. The BCRA reserves continued to fall and in a week the Argentine titles continued to crumble.
To stop the scandalous flight of capital and not fall into default, the solution of the best team in the last 50 years was an agreement with the IMF.
In this context, we saw ahead of us times of falling activity and acceleration of inflation; but the Peronist opposition did not react. Economists friendly to the establishment predicted a modest expansionary phase from the first or second quarter of 2019, they expected a reduction in the inflation rate as well. They talked about recovering a credibility that they had never achieved. They had only managed to return to the voluntary debt markets, giving dollars to the vulture funds and taking loans at 7 or 8% to “bike in pesos”, earning 40% in dollars. They were the players who identified a debt-reduced country in 2015 (Dujovne dixit).
The die was cast, the re-election of President Macri was an impossible re-election. The agreement with the IMF, far from guaranteeing his wishes, buried them.
ECONOMIC PLAN, DECEMBER 2015. Choose the options:
- to) Macri, Prat Gay and Sturzenegger believed that, with a confidence shock and a rain of dollars, there would be economic growthThus, the fiscal deficit in relation to GDP would tend to gradually reduce at the rate of GDP increase, but failed.
- b) Prat Gay and Sturzenegger cheated on Macri. They sold a mailbox to the owner of the Post Office.
- c) They equipped the rustic plan of 1977 to legally destroy everything. Remember that there was never a serious Financial Reform that modified RF 21526 of 6/1977.
The primary deficit of 2017 was greater than that of 2015 and the deficit after interest was much higher, reaching 7% of GDP against the 3.6% left by the president in 2015. Likewise, with the drop in collection and increase in spending During 2016 and 2017, the BCRA continued to issue many pesos to finance the Treasury, an issue that it then had to absorb by placing LEBACs.
The result of the madness of the best team of the last 50 years was a record LEBAC stock that reached $1.3 billion (U$s 85,526 million, at the current exchange rate), which required the Central to maintain the very high rate to continue renewing the permanence in pesos. Suddenly investors began to unwind their positions in Lebacs, increasing the demand for currency.
Too incoherent to seem true, the policy of gradual reduction of the voluminous fiscal deficit, but the inflation targeting policy was sandunguera. In order to successfully implement “inflation targets”, it was demanded that there be no fiscal dominance, that there be intense financial markets where monetary policy transfers were strong, that there were no huge price distortions, that the economy was not dollarized, and that there be an honest estimate of how and by what magnitude an interest rate increase would affect the inflation rate, and the expected rate of inflation.
The monetarist child’s manual said that if these conditions were not met, it would be advisable to establish targets for monetary aggregates in the transition to an inflation targeting scheme.. But the BCRA implemented the cool “inflation targeting” with extravagant fiscal dominanceFor this reason, the assumptions bury it, since in 2016 inflation accelerated to more than 36%, in 2017 25% and in 2018 it directly got out of control to 47%.
In this theoretical framework, free floating was “upside down”, because it is based on the belief that a floating exchange rate contributes to the correction of macroeconomic imbalances, when the floating exchange rate is the result of fiscal policies. and monetary that apply. So the uncontrolled fiscal deficit financed with debt in dollars and the policy of high real interest rates that attracted swallow capital, ended up deepening the exchange rate backwardness. The result was a formidable slowdown in exports, high demand for tourism dollars, and hoarding that never stopped. Everything reminded us of Martínez de Hoz. In fiscal ruin and with the accelerated deterioration from the current account of the balance of payments, the best team of the last 50 years, managed to reach the Twin deficit records, most eminent in the last 35 years.
THE FEAR OF THE GOVERNMENT BEFORE THE EXCHANGE RATE AND FINANCIAL CRISIS
Given the inadequate macroeconomic outline and the magnitude of the imbalances, Argentina suffered “the Turkish crisis”, stronger than Turkey itself.
The slight change in the international financial context hit our country more than the rest of the emerging countries.
The Macri government reduced the primary deficit target for 2018 from 3.2% of GDP to 2.7%, informed the request for assistance to the IMF on May 8, 2018 and appointed Nicolás Dujovne as coordinating minister. The Treasury sold US$2,200 million from Banco Nación in the second 15 days of May, reported a fiscal adjustment of 20,000 million pesos, and arranged a placement of bonds in pesos for US$3,000 million at 5 and 8 years at 20% and 21% for the purpose of sending a message that they still had access to the voluntary debt market.
The measures to cut spending announced were: Freezing of personnel to the National State for two years, suspension of business class air travel for personnel with a rank lower than minister, annulment of agreements for technical assistance with national universities, intervention in bonuses and current prizes, revision of expenses in extraordinary services and a 30% reduction for the rest of the year: overtime, meals and per diems. Interruption of vehicle purchases, restriction of their use to officials with a rank higher than secretary, modifications of new ones with savings of more than 25%, public companies would report their personnel planning for 2019 and funds for public companies would be reduced by 15%. All that remained was to replace the coffee with cooked mate, like 25 years ago in foolish companies.
Executive Director of Fundación Esperanza. Graduate Professor UBA and Masters in private universities. Master in International Economic Policy, Doctor in Political Science, author of 6 books
Source: Ambito
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