Massanomics: what he said, what he kept silent, what he insinuated and what he left in suspense

The new minister had a debut with the focus on calming the financial market: emphasis on fiscal discipline and reinforcement of reserves

By Fernando Gutierrez

08/03/2022 – 9:43 p.m.

Judging by the initial reactions, Sergio Massa’s debut in the Ministry of Economy left a certain “little taste” among analysts, who had raised expectations about a classic-style “package” with well-detailed measures, and found with a list of general postulates on fiscal discipline and export incentives.

Of course, the opinion that matters most to the new minister is the one given by the markets at its opening, after an incipient nervousness shown in recent days. The calm that his designation had caused -reflected in a sharp drop in the parallel dollar- was followed by a reversal of the trend, with the blue again around $300 and sovereign bonds losing value against the rises in the rest region of.

But, above all, the reminder about the seriousness of the situation was given again by the Central Bank, which on the day of Massa’s inauguration had to part with US$150 million, with which it has already lost more than US$ s400 million in just three days in August.

It was not surprising, therefore, that Massa tried to reassure himself that he will try to inject foreign currency to strengthen the reserve position. However, the lack of details left the feeling floating that it is still an issue that is under negotiation.

The following is a summary of what Massa said, what he kept silent, what he insinuated and what he left in suspense.

Exchange rate

The new minister made it clear that “devaluation” is still a dirty word for the government. He ratified the official discourse in the sense that it implies a drop in income and a transfer of resources from one part of society to a minority that will benefit.

In this sense, it continues the line of Silvina Batakis, who had declared that she felt “comfortable” with the current exchange rate. This also suggests that the commitment made with the IMF will not be fulfilled -or, at least, that it will not be fulfilled all at once- to maintain the exchange rate of December 2021, which today would mean an official dollar of $146.

agricultural export

The issue that has been the most speculated on in recent days, that of the liquidation of soybeans for US$16,000 million that are stored in silobags, has not been clarified. Massa said that an agreement will be reached so that they enter “in advance” US$5,000 million.

He hinted that there will be incentives, but did not make it clear whether it will be done through an exchange rate split or through fiscal relief. In any case, he implied that the resolution of the Central Bank to recognize the MEP exchange rate at 30% of exports is still in force, and said that this measure would even extend beyond August.

When the journalists asked him for details, he said that he was talking with the sectors involved, which left the doubt about how firm the commitment of the field will be on that liquidation.

Reinforcement of BCRA reserves

In any case, the figure announced by Massa is not so impressive when you look at it “with a magnifying glass.” The reality is that $5 billion in agricultural export revenue is not that big of a number for this time of year. It is approximately the same that had been settled last year between August and September.

It is true that it would imply an improvement over the poor level of sales in June, but it should also be remembered that last May a record of US$4.2 billion was registered in one month. In other words, if the field spends US$5,000 million in liquidation, it will imply short-term oxygen, but it is far from resolving the pressing situation of the Central’s reserves.

As for the rest of the reinforcements, Massa alluded to the entry of some US$2 billion from international organizations, such as the IDB and CAF, which were already in the approval process.

The really innovative announcement was that of a “repo” loan with investment banks and sovereign wealth funds, which would imply resuming foreign borrowing. He did not speak of amounts or rates, but it transpired that there were offers for US$3,000 million.

(News in development)

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