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How to fix with the IMF in 5 minutes?

As the ineffable Alfredo Casero says: “I want flan.” Meanwhile, the central banks of the “serious countries” contribute the greatest monetary uncertainty since the end of the Second World War, emerging from an extravagantly expansionary policy. The United States exceeded between 2020-2021 by 25% -adjusted the dollar- the total cost of the victory of the Second World War.

Referring to Kant “time and space”, “a priori and a posteriori”. When a debt is being renegotiated, the true intentions are not revealed. The agenda of “knowing what happens” is that of the international establishment, not that of people who “know how and what can be done”. If we want to help, let’s leave those who know about finances, let’s trust those in charge of negotiating with Martín Guzmán.

The ultra Kirchnerists should review that Nestor Kirchner did not threaten, nor did he believe in the end of the world. He endured. Let’s leave the Trotskyist slogans for Nicolás del Caño, because becoming Che Guevara with the IMF does not add up. It is being negotiated and, when the maturity arrives, if the dollars are not there, we will have to see what happens to the entity that granted a huge loan.

Surprise is not only a key political factor, it is the key to a financial negotiation. At the moment the news of the world goes through the submarines that the US sold to Australia, Taiwan and its defense minister who said that China would be able to invade the island and the hypersonic missile with nuclear capacity that China fired that gave around the world.

THE FATAL 5 MINUTES

The treatment of the “vulture funds” issue was surprisingly swift. The speed of borrowing in 2 years was a world record. Brazil, Chile, Mexico, Peru, Colombia, Venezuela and Uruguay were exposed to the same shortcomings of the international contractual regime (worse credit quality), however they achieved the “investment grade” or Investment grade (Source: Juan J. Cruces based on to Institutional Investor magazine).

Macri-Prat Gay, Sturzenegger, agreed in 5 minutes, but badly. They did not get even close ratings, they did not pay less than 7/8% per year (speculative degree) 3.5 / 4 times what the populist, dirigiste and left-wing statist government of Evo Morales paid. Economically, the benefit of fixing in 5 minutes has never improved costs in 4 years.

According to Cruces in 2013, if Kicillof showed willingness to solve the problem in reasonable terms, recognizing certain rights of the litigants, it was not even necessary to pay everything they asked for. The results of hold-outs litigation showed that the majority agreed (1976-2010) Source: Schumacher, Trebesch and Enderlein, 2014a.

But Macri-Prat Gay fixed it in 5 minutes, and the positive turned into the negative, the enormous capacity to place debt offered by a country with very low levels of indebtedness (Dujovne), allowed it to return to global financial markets with unusual speed. In the first year of the Government of Cambiemos, the placement of foreign debt was around US $ 42 billion.

To cancel the payments made by Griesa 2014/15 about US $ 3,000 million, to pay the vulture funds US $ 8,700 million. As of December 15, 2015, the estimated total debt with the private sector and multilateral organizations was US $ 83,710 million (20% of GDP; 13% of GDP with the private sector, 7% of GDP with international organizations), ” zero with the IMF ”, ended up being 5.5% more than the GDP, only with the vulture funds, reaching a total of u $ s 106,000; 31% of GDP in intra-public sector debt- and 5.5% of LEBAC’s GDP.

The ideological approach implied by the apothegm “back to the world” became in just 2 years a self-generated enemy at the service of the disaster of domestic politics, very well taken advantage of by the close bond between the economic team and international banks and investors, after a decade of debt relief. The visits of Obama, Trump, Renzi, Hollande, Merkel, Macron and the G20 party itself, never made a difference in terms of investment and business for Argentina.

FISCAL AND MONETARY POLICY

In the exchange market, they went from a fixed exchange rate system with capital controls to a dirty floating exchange rate system without controls and an autonomous monetary policy (Prat Gay-Sturzenegger), they collapsed the control scheme and unified the foreign exchange market.

Since January 29, 2016, in just 33 consecutive days, US $ 2 billion in reserves have been lost. In addition, export withholdings were eliminated and the minimum non-taxable income increased, while electricity and gas rates increased, in an extravagant way. The LEBAC and call rates were set between 36.5% and 38%, allowing a bike never reached. The BCRA accumulated losses in the future dollar market of more than $ 75,000 million ($ 42,450 million in December 2015, $ 9,000 in January 2016, and $ 25,000 in February 2016) due to the effect of the devaluation. Against its own opinion, the economic team almost exclusively appealed to a contractionary monetary policy without fiscal correction. Thus, credit and the level of economic activity suffered excessively. The Government began its mandate with an acceleration of inflation and a fall in the level of activity.

Although targets were set to gradually reduce the fiscal deficit and inflation, for 2016 a primary deficit target of 4.8% of GDP and an inflation target of 20/25% were announced, which were actually 7.5% and 41% respectively. . In another vein, investment reached just 14 points of GDP, the lowest ratio in the entire region, and lower than in all previous recessions. In terms of investment – from the beginning – the Macri administration could not generate optimism, quite the opposite. As the GDP did not grow, the capital / product ratio fell. Likewise, a part of the capital stock became less productive as a result of the gradual elimination of the subsidy necessary for energy and the increase in the supply price of gas to stimulate production – absolutely unnecessary – which affected the competitiveness of gas-intensive industries. . The year ended with a 2.3% drop in GDP, instead of a 3.5% growth as predicted by the economic team. A forecast error of around $ 30 billion, traveled 5.7% of GDP.

The fiscal deficit and DEBT IN ARGENTINA

According to the same study, the final result of the Argentine public sector (national + provincial + municipal) as a percentage of GDP: 1961-2013, provided an average deficit 1961-2013 of 4.2% of GDP (Juan José Cruces, Ph.D in Economics , University of Washington, rector of the Universidad Torcuato Di Tella). So if we removed the 7-year surplus and 3-year low deficit from the Kirchner period, we would have exceeded the 7% deficit, including the convertibility period. Phew!-Is Kirchnerism a fiscal success? – This is data.

Everywhere, but especially in Argentina, public debt historically stops capital accumulation, puts the stability of the economic and financial system at risk, making it impossible to administer monetary policy and later it is difficult to avoid the social outbreak (2001 ). The record high twin deficits of 2017, through debt, redistributed the projected burden for the long term and became a serious inconvenience, registering a dizzying stock in just 2 years. In December of that year the maximum of almost 3 decades had been reached (around 13% of GDP).

Successive governments will be forced to raise taxes or lower primary spending to pay off debt. Despite the budgetary balance being reached, if the markets and the multilateral credit organizations agreed to the simple roll over (permanent debt renewal), more debt would have to be placed to pay the interest on the stock, or it would grow sharply. consistent with the average interest rate that is accruing.

THE LIE AS A CHARACTER

For Christians and Jews The Bible rejects the lie insofar as it refutes and, especially when it destroys the communion based on the fidelity that the person owes to God and to his fellow men. This is the meaning of the command: “You shall not bear false witness against your neighbor.” It also speaks of the person who is genuine, congruent, friendly and trustworthy; Jesus says about Nathanael: “Behold a true Israelite in whom there is no fold.” The lie is double-mindedness, disloyalty, falsehood, hypocrisy, and so on. Authenticity is the key to a leader who builds his leadership effectively. With concrete facts that support his sayings, since the fundamental assumption to produce political or financial credibility is that the speaker who acquires a commitment fulfills it, so that he can be trusted. In the private sector, frankness is the most easily identifiable resource for obtaining links with the market. And it is achieved by being consistent as iteratively as possible with the fulfillment of promises. “Liars will not inherit the Kingdom” (John 8:44), but they should not be able to deceive us again.

Professor of Postgraduate UBA and Master’s degrees in private universities. Master in International Economic Policy, Doctor in Political Science, author of 6 books. @PabloTigani

Source From: Ambito

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