It was inevitable: now everyone wants “their” industry dollar. In addition to the high exchange rate that has been recognized since last winter for soybean producers and was extended to many sectoral economies linked to agriculture, the request for a special dollar for the SME industry was added.
The “ministerial” Emmanuel Álvarez Agis had already warned him: “The soybean dollar is like giving a child a tablet, once you give it to him, he will ask for it all the time.” Other of his colleagues resorted to less sympathetic metaphors and compared the soybean dollar with the addiction to a drug that, when abandoned, causes a withdrawal syndrome.
The truth is that with each passing day the market is consolidating the perception that the preferential exchange regime will cause a stream of complaints in such a way that the official dollar will end up being the exception and not the norm.
The request, which actually had already been hinted at last year during the debate on the growing scarcity of foreign currency, took advantage of the “timing” of the new export incentive scheme to revive an old aspiration of the union Industrial Argentine SMEs (IPA). Ask for a special dollar for export industries.
Or, better said, it raises its aspiration that the “spread” between the buying end and the selling end of the official exchange rate be reversed. That is to say, that the Banco Central recognize him a higher dollar to the exporting SME but that a low exchange rate be maintained when selling foreign currency to SMEs that need to buy inputs abroad.
The argument raised by Daniel Rosatopresident of the industrial entity, is that the official dollar at $210 was so low that Argentine companies no longer find it profitable to export and prefer to focus on the local market.
As had happened in previous editions of the “soybean dollar”, the industrialists also demanded a preferential exchange rate
The warning of an industrial recession
The consequence of this situation, the industrialists emphasize, will be negative for the economy as a whole, because the substitution of the export market by the domestic one is not innocuous. Given the loss of wages that inflation is causing, internal competition for price will begin to take place, which will reduce profit margins. The danger, warns Rosato, is that the current process leads to job losses, a greater degree of informality in the industry and even the closure of production plants in the most compromised sectors.
The truth is that the official indicators seem to agree with him. The industrial manufacturing production index measured by the Indec recorded in its last measurement in February uin the interannual drop of 1.4%, while in the comparison against the previous month it shows a drop of 1.3%.
And the industrial leaders place the shortage of foreign currency for the purchase of inputs at the center of the problems. Among economists, the “three to one” rule is widely accepted, whereby for GDP to grow one point is necessary that imports grow three points.
This year, far from that formula occurring, the negative variation will occur. An estimate of Jorge Vasconceloschief economist of the Mediterranean Foundation, indicates that import authorizations -without considering the energy item- for the next seven months will oscillate between US$3,000 and US$3,500 million per month, which implies a 40% drop from the level registered last year.
It is not surprising, therefore, that after a 2022 in which the GDP registered a positive variation of 5.2% to a recession that will be located at 2.7%, as projected by the economists who participate in the REM survey of the Central Bank.
The hidden costs of the sectoral dollar
At first glance, it does not seem easy for the claim of the SME industrial union to be echoed by the Government. After all, it has already received enough criticism for the new edition of the “soybean dollar”, which is showing difficulties in starting up due to disagreements between soybean producers and the oil industry.
To top it off, while It remains in doubt whether the official target can be met After some US$5,000 million are liquidated in the next month and a half, what will come true are the so-called “secondary effects”, such as distortion in the land rental market and, above all, the derived monetary expansion the difference between the buying and selling exchange rate.
The latest official indicators of industrial production confirm a slowdown in activity in the sector
In other words, for every dollar that is exported under the “agro dollar” regime, there will be a difference of $90 that will end up being validated by the Central Bank. The Mediterránea calculation is that in the first edition, last September, this injection of liquidity was equivalent to 28% of the monetary base, while in December, when the “soybean dollar 2” was implemented, the expansion was equivalent to 10% of the monetary base.
On this occasion, the expectation is that a situation similar to that of December can be replicated, with the aggravating circumstance, of course, that at that time inflation was running at a cruising speed of 5% per month and now it is running at 7%.
With this context, it does not seem that the Government’s economic team is in the best conditions to consider the establishment of a new preferential exchange rate for SMEs. However, the industrial lobby raises its arguments with the aim of obtaining some kind of preferential treatment. After all, the Government’s argument for these exchange rate policy measures resides precisely in the need to have foreign currency with which to sustain the pace of industrial activity.
Sniffing out political timing
“The payment of exports to the official dollar became unsustainabledue to the fact that many companies have to import to produce with very high costs, both for the necessary financing to pay for purchases in the world, and also when the urgency of having to pay arises. appealing to financial dollars”raised Daniel Rosato.
And his statement hits the nail on the head, given that one of the issues under internal debate in the government coalition is to keep the supply of foreign currency to the minimum possible for Argentine companies that have dollarized debts to settle abroad. In this sense, an old wish of Kirchnerism is for the BCRA to completely dispense with this financing and for companies to appeal to external credit, assuming the cost of the market..
On this point, a survey released at the beginning of the year by the Argentine Chamber of Commerce among 200 SMEs, the issue of financing was pointed out as one of the main operational difficulties: 61% had declared problems obtaining the 90-day financing required by the new system, which had led to a general drop in levels stock.
The argument of the SME industries is that the lack of a solution to their problem, far from having a sectoral impact, will end up spreading its negative consequences to the rest of the economy.
The Industriales Pymes Argentinos union warns about the diversion of production from exports to the domestic market, with loss of profitability
“Although it is true that industrial exports do not mean the same amount that the field contributes to the Central Bank’s reserves, the latest news of a deficit trade balance, due to the drop in sales of SMEs, should be more than a call of attention for the Government, because there will be fewer and fewer factories destined to sell their products in other parts of the world”Rosato maintained.
The argument of the industrial SMEs is that their request for a sectoral dollar will not necessarily imply a cost, because the recognition of more pesos for the sector will be compensated with a greater generation of foreign currency for exports and, in addition, by the creation of jobs employment, an argument that the Government is not indifferent to in the middle of an election year.
In a concession to the Peronist lexicon, the statement from the IPA union recalled that, together with the unions and provincial governments, it is in the first row to “develop the industrial model with import substitution“. But, above all, he made a reminder about the need to differentiate small entrepreneurs from those who have financial backs.
“We depend on urgent measures to sustain activity, because our factories depend on day-to-day operations. Unlike large companies, the profitability of SMEs does not allow them to have a financial back that can withstand a long-term crisis”the statement remarked.
Judging by the history of other requests of a similar nature, the request for an SME dollar does not seem to be among the priorities of Massa and his team. However, the political climate is ripe for the new claims season. And at a time of proliferation of sectoral dollars, SME industrialists do not want to stay at the bottom of the list.
