Public debt debate: chronicle of an announced default (Part LVIII)

Public debt debate: chronicle of an announced default (Part LVIII)

Although he had already achieved a certain order in the Cambiemos tenement, thanks to the good offices of Elisa Carrió, he failed with the UCR, which wavered from time to time. We say tenement, because it is a construction in poor condition, precarious like the Cambiemos coalition, where each room becomes the home of a different family, and although the doors open onto the central patio, and the bathroom, as well as the patio and corridors , which are shared by all the inhabitants, fights are inevitable. The situation described has immortalized the political order of that disastrous period.

Marcos Peña concentrated more and more power, Macri even said that Marcos Peña was Macri himself. For the first time the options to install were ultra-right with the campaign focused on security, however, it did not overcome the hypnotic litany of “the K corruption”. The Macrista priority was based on maintaining the polarization with Cristina Fernández de Kirchner, who, according to some surveys, could be a candidate and win the elections if she promoted unity in the districts of the province of Buenos Aires.

The strategy that would be repeated indefinitely, after the start of the first trial against Cristina, was left for the end of May. Lavagna played, but of the three spaces he was the one with the least chance of reaching the second round, if he arrived he could win the election, the pollsters said.

Lavagna represented the best candidate for the third space, the question was whether he could organize a political structure to support him at the national level. Pichetto was still a former Kirchnerist Peronist for 12 years, seeking to be vice president of Lavagna, which included Massa and Urtubey.

The governors would take a national position, once their provincial elections were resolved. To the right of Macri were Espert and Olmedo (the one in the eternal yellow jacket), and Gómez Centurión (famous face paint) could be added. Although they could not win, they could take votes away from Cambiemos, especially in the PASO.

President Macri worked very little in the summer, but Congress did not directly meet during the extraordinary ones of January and February 2019, when already in 2018 (the opposition had to confront the return of the IMF and the appointment of Luis Caputo in the BCRA) it was the year of least parliamentary activity in 34 years of democracy.

The government aspired to labor laundering, unionism was headed for a new general strike between March and April 2019, there was dialogue and meetings between dialoguistas, the tough and the combative. Teachers wanted to recoup the loss in purchasing power of 2018, as they were the lowest earners in the OECD and in 2018 only received half of inflation. It was a union that was really hated by the government leadership and the PRO party.

The Social Movements maintained the protest in relation to unionism for the increase in plans, the minimum retirement and non-contributory pensions. All conflicts are exacerbated; such as the vegetable producers who gave away vegetables in Plaza de Mayo, the vendors of San Telmo who faced the police, and the picketers who went to ask for food in closed neighborhoods.

The great containers of tragedies were: the CGT, which was headed for a new general strike, but without a plan of struggle, and the social movements that would be in permanent mobilization trying to represent the retirees, while the social tension grew.


The government was thinking monetary and fiscal issues. The fork of the capital Piluso, a “short V”. The only issues handled by his economists and comrades from the members’ platform. The previous inflation targeting scheme and interest rate control to achieve said goals had been replaced by a monetary base control regime with an “almost zero” issuance target, where the only instrument with which What the limited BCRA had to achieve this objective was the Leliq auctions.

To keep the monetary base numb, the BCRA regulated liquidity through Leliqs. These bills could only be acquired by banks, with which the BCRA managed to lower the balance of demand through changes in bank reserve requirements and through regulations that limited acquisition for other purposes.

In February it was already difficult to estimate the demand for Leliqs from banks. With a single instrument of monetary regulation, it is very difficult to keep the interest rate stable, which is with the soul in a thread due to the demand for fixed terms, and the value of the dollar. The high volatility of interest rates and the exchange rate constituted the empirical evidence.

The problem is that, although it is feasible in the short term, the BCRA was trying the impossible; simultaneously maintain a monetary policy of almost zero emission, freedom in the mobility of capital and a managed exchange rate. But this trilogy is impossible (trilemma).

February 2019 started with a monetary base above the target of $1,440 trillion against $1,370 trillion, the BCRA opted to absorb pesos at the beginning of the month offering an amount of Leliqs higher than the maturities, significantly lowering rates. Demand increased more than supply, as banks sold $1.8bn of their dollar holdings plus foreign credit lines to acquire Leliq.

The rate plummeted from 54.9% to 43.9% and the BCRA sought to limit the purchase of Leliq from banks to no more than 65% of their deposits. The BCRA sought to absorb the excess of the monetary base which should have led to an increase in the Leliq rate, but instead the rate collapsed because it failed to estimate the demand for Leliq.

As February started with a monetary base above the $1,440 trillion target against 1,370 trillion, the BCRA chose to absorb pesos at the beginning of the month, offering more than the maturities, but the Leliq rate did not rise, rather it fell significantly.

Demand for Leliq increased more than supply, as banks sold US$1.8 billion of their holdings, plus foreign credit lines to acquire Leliq, so the rate plummeted from 54.9% to 43.9%, and the The BCRA sought to limit the purchase of Leliq from banks to no more than 65% of their deposits and the inflow of capital to speculate with Leliq.

When the monetary base reached a figure well below the target announced on February 18, the BCRA opted not to maximize the overcompliance of the base target and issued $137.4 billion in five days. Thus, the monetary base closed the month averaging more than $1.3 trillion, as announced by the BCRA.

At the end of February, the BCRA concentrated on avoiding an excessive overcompliance with the monetary base target with respect to what it announced. With a Central Bank that had only one instrument, and that during February was concerned about the exchange rate, the interest rate and, simultaneously, about meeting the monetary base goal, the interest rate and the dollar showed high volatility.

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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