Sunday, February 5, 2023 | 8:15 a.m.
Inflation played a trick on Sergio Massa in January. The official data will only be known on January 14 and according to most consultants it will be located in a range that goes from 5.5% to 6%. Even in the last week of last month there was an acceleration in prices, especially in the food item. It is no coincidence: the companies came out to cover themselves before the relaunch of Fair Prices, which -as Infobae had advanced- the Economy Minister himself carried out on Friday.
Slowing down inflation has now become a race against time. Massa insists that the index will drop “to less than 4%” for April. The bet is still very risky. The expectation of the consultants, as disclosed by the Central in the Survey of Market Expectations (REM), is that inflation remains above 5.5% every month, at least until June. This is, well above the promise made by the Minister of Economy himself.
Fast attack
The relaunch of Precios Cuidados seeks a very rapid attack on inflation through strong controls (according to what was said, they will monitor 15 million prices daily) but without attacking the true causes of the scourge. The government’s objective is obvious and the electoral calendar narrows the times: to recover real wages -after a 20% drop in the last five years- from a slowdown in prices.
At this point it is an open secret that Massa’s potential presidential candidacy depends on getting good results on inflation. The improvement of the actions or the fulfillment of goals with the IMF contribute nothing in electoral matters. It is necessary to achieve results that imply a tangible improvement for people.
red pitfall
The rise in meat is now one of the main stumbling blocks to lower inflation. If it had not been for the fact that prices in butcher shops remained practically flat in the second half of 2022, inflation last year would possibly have reached or exceeded 100 percent.
But after many months of flat prices, prices have started to rise and are threatening to outpace this month’s index. According to the economist Fernando Marull, for example, in February it would be at 6%, due to this specific factor.
This week there will be several announcements related to the sector. On the one hand, there will be incentives for the supply to increase in the medium term, with a scheme that will favor the fattening of cattle. At the same time, a rapid increase in supply will also be sought through exporting refrigerators, which could dump balances in the local market given the drop in international prices, which fell for the seventh consecutive month.
But the icing on the cake of the measures aimed at the sector will be the return of 10% of purchases in butcher shops when paid with a debit card. The announcement seeks to relieve the poorest sectors and reduce the inevitable impact of the price rise that could accelerate in the coming days in a key product of the basic basket.
The details will be known in the coming days, but the goal is for both refrigerators and butcher shops to sign up for the program. Only those in the registry will be able to offer customers the 10% discount on purchases, for a maximum of $1,000 per transaction.
Food is outside the Fair Prices program and becomes very difficult to control, to the point that in 2022 it increased well above store products. It remains to be seen if the upcoming announcements will be enough to cushion the impact of the upcoming increases in meat.
always the green
Inflation is the main challenge for Massa, but clearly not the only one. The exchange front also presents strong complications. The Central Bank lost USD 2 billion in net reserves in January and now it would need to recover them between February and March to meet the IMF’s quarterly goal.
The drought and the rise in food prices due to the war in Ukraine precipitated the work by producers due to the difficulties to continue fattening the farm. This increased supply kept prices in check.
The situation would become even more complicated for June, since according to what was negotiated with the agency, net reserves should jump to USD 10.8 billion. This is a figure that the vast majority of analysts perceive as “impossible” to meet, much less in the midst of the electoral process. To top it off, the drought will subtract around USD 10 billion from this year’s foreign exchange supply.
The unknown in this case is whether Massa will be able to pull another rabbit out of the hat as happened with the first and second versions of the soybean dollar. The special exchange rate for the export of soybeans allowed for an exceptional sale of foreign currency that ended up in the coffers of the Central. More multilateral loans? Any new agreement with China? A new differential exchange rate for soybeans or other exporters?
In the middle, the “repo” continues to turn, that is, a loan program from international banks against the guarantee of bonds. According to what they say in Economy, “it is ready”, although some details still need to be defined. One of them is that the loan is to the Treasury and not to the Central Bank. On the other hand, it would be sought that the rate be one digit in hard currency and with a term of more than one year.
The sharp drop in Argentine stocks and bonds on Friday, a day that was also negative for global markets, is a wake-up call. The euphoria for local assets that began a semester ago would already be running out. Now investors want to see the effects of the drought on the exchange rate and the economy. But above all, they await more concrete signals about the electoral process and who the candidates will finally be. Nobody wants to expose themselves to another beating, like the one that happened in the PASO of 2019, when Alberto Fernández obtained a victory as overwhelming as it was surprising.
