The last monitoring of inflation put Miguel Pesce on high alert: the price increases in the first half of April give a projection for the month of 7.5%, which would put the economy at a new inflationary floor and very close to spiraling.
The relationship between the head of the Central Bank and Sergio Massa It is at its worst moment, and not only because of the tension generated by the inflationary spiral. The escalation of the dollar and, above all, the delicate situation of the reserves heated up the spirits of both officials.
To such an extent that, until last night, there was no agreement on the strategy regarding the interest rates. The BCRA board of directors will decide this afternoon if, after the latest inflation data, and in full rise in financial dollars, a new rate rise is applied.
Hay confusion in the economic cabinet. In the middle, the IMF exerts pressure so that there is a strong rise in the cost of money to avoid a flight of bank deposits, perhaps the last containment dam that the economy has.
Officials who oppose a new rate hike argue that such a measure would hurt the economy more – due to the additional issuance of pesos needed to pay for the Leliqs. And that it will not solve the basic problem that exists today: the lack of US$20,000 million dollars caused by the brutal drought.
From the Palacio de Hacienda they distribute blame between the Central Bank and the cereal companies for him, up to here, failure of the “agro dollar”. To one for the instrumentation and to the exporters for breaching the agreement. Yesterday, there was no currency settlement and on Tuesday they had barely reached US$35 million. It is more than clear that in this way it is impossible to reach the US$8,000 million imagined by the minister.
The new agricultural dollar is not bearing fruit and reserves are still at worrying levels.
Without the liquidations for the new “soybean dollar”, the Central Bank was forced to sell US$197 million in the market to avoid an abrupt jump in the price.
In this difficult context, the blue dollar rose to $423. Although the worst happened in the channel of alternative dollars that are operated through banks: the cash with liquidation climbed to $435 (+2.1%) and the MEP dollar, to $421, with a daily rise of 3% .
The dream shield (of dollars)
Massa has the diagnosis: it lacks u$s10,000 million to ensure the stabilization of the economy between now and the end of the year. It’s half the cost of the historic drought; the other half could be obtained by appealing to the pockets of multilateral organizations, such as the World Bank, the IDB and the CAF.
Yesterday afternoon, from the minister’s offices they spread the powerful support of the White House to the minister’s management.
The President’s Special Advisor Joe Biden for Latin America, Juan González, said that the United States is willing to “play a constructive role” for “help Argentina“.
“In the conversations that we have had with him (for Massa), the bottom line is that it has to be the Treasury Department, the IMF, the World Bank and the IDB that come up with how to address these challenges. The United States always plays a role constructive in that conversation, including the White House,” said González, an acquaintance of the economy minister.
The Government is betting that Biden’s support will be transformed into greater flexibility from the IMF.
The dollars are not enough and the accounts do not close
The diagnosis of the economic consultants is practically unanimous: as it is, there is no way to get to the elections without a abrupt devaluation of the exchange rate.
This is what the main players in the market observe, who accelerated dollarization in recent days, causing the widening of the exchange rate gap.
The political scenario is procyclical: the appearance of Javier Miley as an option with a chance of reaching the ballot in the November presidential elections darkens the outlook. The libertarian proposes dollarization as his main scheme, an attempt that -without dollars in the BCRA- could only take place through a total liquefaction.
In this context of total political fragmentation it is very difficult to sustain such a fragile balance. What are the real chances that the support that Massa collects on his trips to Washington will materialize?
For now he got a “recalibration” of the goals with the IMFbut it is clear that dollars are scarce here to sustain the economy. Without dollars, goal adjustments don’t do much good.
The possibility of direct credit from the private sector does not appear either, something that was tested in previous crises, since the Monetary Fund could veto it. At some point, the possibility of signing a bond by the exporting cereal companies leaked from the Economy Ministry, but that idea did not prosper.
The Milei effect accelerated dollarization and consultants are already evaluating the possibility of a devaluation.
The next days look keyunder a reality that becomes dramatic as the days go by and Central Bank reserves remain meager. Times are shortened; There’s no doubt about it.
Inflation as a backdrop
The main food and beverage manufacturers -who signed the agreement for “Fair Prices” with the Government- maintain attention on each movement in the exchange market, without taking their feet off the plate. For now.
The executives slip that, after each shot of the gap, prices also registered a jolt. For now there have only been some specific reactions, in relation to the suspension of sales, especially of imported products.
In these companies they await a call from Matías Tombolini, the Secretary of Commerce, who should guarantee that food prices and supplies remain on normal tracks. A difficult goal for this Argentina.
