The new government’s rule is not to issue, we are going to achieve fiscal balance and capitalize the Central Bank. Strong rise in bonds and stocks in sight
With data as of November 27, the monetary base totals $8.0 trillion, while the remunerated liabilities of the Central Bank add up to a whopping $24.7 trillion, a figure that should be rescued to bloat the Central Bank’s balance sheet.
What no one says is that in the assets of the Central Bank there are securities for US$ 114,000 million, these securities were valued at 100% of their parity, when in the market the Argentine debt is worth at most 35% of this value.
The government should carry out a clamping policy, in the quest to clean up the Central Bank.
First of all, must manage to have a fiscal surplus, to achieve reputation and for Argentine securities in the market to have a higher price than the current ones. This implies that the AL30, which today is trading around US$33, could be worth at least US$45. This would open up the possibility for Argentina to obtain financing without having to resort to international organizations, while at the same time it would show a Central Bank balance sheet with more genuine capital.
In second place, should be able to reduce or cancel the stock of leliq, one way to do this is by obtaining dollars abroad to cancel the debt of importers. Importers who brought in merchandise from abroad have not paid for it, and are saddled with pesos in the financial system. Paying this debt will make importers get rid of these pesos and the Central Bank should proceed to sterilize these pesos, which would reduce remunerated liabilities. It would be a historical fact that the Central Bank breaks and destroys pesos, so that the money supply in the market falls.
In third place, it would be necessary for the government to carry out money laundering with a prize for those who join it, it would be a bonus with tax benefits for whoever joins and brings dollars to Argentina. There would be no such benefit for those who adhere to money laundering and leave the dollars abroad.
As can be seen, the backbone of the plan is to achieve a fiscal surplus as quickly as possible. The first months will be a tough adjustment, but this will allow the company to achieve a local and international reputation, and this should be reflected in the rise in the prices of public debt.
We need to request a loan abroad to restore Argentina’s trade with the world, we have imported goods for around US$36,939 million and we have not paid it, of this total the debt with unrelated creditors would total US$18,000 million , and it would be the fastest to cancel. The more import debt we cancel, the more pesos will be sterilized, which is a two-way measure, bringing Argentina closer to the world and taking pesos out of the market.
In the history of Argentina’s work abroad, money was always requested to finance the largest public expenditure of Argentines. On this occasion, funds would be requested to reestablish Argentina’s trade with the world, paying debt to foreign companies, whose representatives They are sitting in the IMF. A priori it does not seem difficult, but Argentina has rarely fulfilled what it promised and that is what is complicated.
. – A plan of these characteristics will force an adjustment in public spending to restore the fiscal surplus, which would lead us to a scenario of stagnation with inflation as expressed by the president-elect. That is good news, no matter the costs, it aims to solve the root problems and reap the benefits in the future.
. – A priori it could not lift the stocks, that would be left for later, when the Central Bank can be capitalized, and fulfill the commercial obligations of the private sector abroad. We must strongly reduce the private sector’s debt to the world, which totals US$93,400 million, of which US$55,542 is commercial debt and US$37,959 million is financial debt.
. – Reestablishing Argentina’s trade with the world is the fundamental step of the next government, without imports there are no more exports, this is essential to achieve greater dollar income in 2024.
. – Successful money laundering can also provide the country with a greater supply of dollars, which will not allow us to free ourselves from the stocks in the medium term. For that you have to generate trust. If the demand for pesos continues, this would help lower the stock of leliq and repos in the Central Bank, and accelerate the capitalization of the Central Bank.
. – There are many detractors of the new economic policy, and they talk about the danger of more debt, but no one expresses the delicate situation in which the country was left, with reserves of US$ 21,538 million, and a private commercial debt of US$ 55,542 millions. If it is not by taking on debt, there is no possible way to get out of a structural recessive scenario that the country has, which has not grown since 2011 to date, but in the same period measured per capita we are down 11.0%.
. – If it is possible to obtain private financing and apply these funds to reestablish Argentina’s commercial link with the world, there is no doubt that we will see a strong rise in Argentine bonds and stocks.
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