2023-04-18 14:17:58
The Economist Santiago Manoukian He maintained that the Government is managing to maintain the currency gapbut it impacts very strongly on the inflation, which is already at a very high level. “The political expression that he resolved Sergio Massain August 2022, was a necessary but not sufficient condition to avoid this turbulence that we are experiencing now,” he declared in Modo Fontevecchiaby Net TV and Radio Perfil (FM 101.9).
We do not have a very encouraging outlook. It is very uncertain and difficult to think that the dollar will settle, at least the parallel…
Regarding the parallel, we saw that it reached a new nominal recordbut let us bear in mind that we are in an economy where all the nominal value is increasing more and more, and it is settling at an increasing rate.
It is what we see, not only with the inflation from 7.7% in March, which was the highest monthly in 20 years, but the first data for April are also showing inflation that is close to 7%.
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If one sees that dollar in real terms, that is, inflation is discounted, not a crisis dollar. In July-August 2022, when the crisis over the departure of Martin Guzman, that dollar at today’s price would be at $550, and today it is at $410. So, it has been getting cheaper ever since. We are in an economy where everything tends to rise, and the dollars too, it is expected that they will continue to nominal.
we are in a currency gap that the Government, at least, is managing to keep it within the 90% zone. Because if he were to shoot, as he did at that time, two particular factors occur.
The first is that it impacts you on the inflationbecause there are more oiled mechanisms so that movements in financial dollars are transmitted to prices, before it did not happen so much.
On the other hand, if the gap accelerates a lot, an offering is generated to the net supply of foreign currency in the exchange market. Exporters, who are going to stop exporting, slow down sales while waiting for a devaluation, and importers try to advance foreign purchases.
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Argentina’s inflation has been in double digits for 15 yearsand it is acquiring its own dynamic, difficult to stop in this regime of high inflation, where contracts have been getting shorter and shorter, indexation in many contracts is already a common currency and where the credibility of the economic team has been damaged in the last months.
This affiliation that we are seeing is putting pressure on the movement of the official exchange rate, which is going to have to accelerate a little more so as not to validate an exchange rate delay greater than the one we already have.
Therefore, this is going to feed back the dynamics of prices, a dynamic that is launched forward with a very strong inertia, difficult to disarm, especially for a government with this loss of confidence.
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We’ve had double-digit inflation for 15 years, but why do we have the feeling that this is a much more complex time in terms of economics than recent ones?
Because it is not the same to think an inflation of 50% than one of more than 100%. Not only is it double, but it is qualitatively different.
The mechanisms that try to protect us from inflation are feeding it. Precisely, indexing the contracts. For example, the price of transport is adjusted for last month’s inflation, and that is decided by the public sector, it is not even something decided by the private sector.
One would say, in the private sector there are also contracts that are being indexed, such as the rent. There are rents that are directly adjusting for three months CPI.
Massa insisted that the drought hit hard and he wants another permission from the IMF to loosen the goals
When that becomes widespread in the economy, and everyone ends up looking at past inflation in order to think regarding future inflation, it is very difficult to curb future inflation, especially if you do not have someone who generates trust and who coordinates expectations with everyone, with economic agents, with unions, with employers and with the population in general, in order to achieve lower inflation.
In addition, we are with lack of anchorsIn the coming months, the Government cannot freeze public service rates, nor can it slow down the official exchange rate, because you have parities that have a real salary level that is below 2017, and that they are going to want to recover it, especially all in the election year.
And to this are added a series of other specific factors, quite temporary, that have to do with restricting exports that reduces the amount of goods in the economy, with prices that are more sensitive to the movement of the exchange rate gap.
The basic basket increased more than inflation in a year
Also because you have the impact of agro dollarwhich is a dollar that is accompanying a devaluation that is not only for the soybean complex, but for regarding 15 regional economies, according to the latest resolution, and that is a slightly riskier measure because you are devaluing sectors that have greatest impact on basic basket.
So, there are quite a few differences with respect to that inflation that we saw stable at around 25%-30% prior to 2015, and that now acquires a worrying and risky dynamic.
Fernando Meaños (FM): For a long time there was talk that the anchor, which you claim, was going to be the agreement with the IMF, what do you see today of that agreement? How can maintaining help us?
the deal not consistent with a drop in inflation. Let’s think regarding January 2022, the agreement is signed at the end of March, the exchange rate gap had been rising a lot, 2021 had closed with 50% inflation. So one said, if the agreement comes, expectations can be anchored, but because of how the agreement is implemented, that would imply that you would have to speed up the movement of the official exchange rate and adjust rates.
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In other words, you were going to raise two typical anchors that keep inflation dormant, then those fiscal corrections raised rates and raised the exchange rate to bring it closer to inflation, and it would mark you that inflation was not going to moderate for what less in 2022.
Then came the two shocks, the war in Ukraine and the departure of Guzman and the debt crisis in pesos, with inflation accelerating from one month to the next from 5% to 7%. This was built on the dynamics of 50% inflation and an agreement that might anchor your expectations, but more so in the medium term if you made some more structural reforms.
The problem is that it is not a consistent agreement with the drop in inflation, and you were not going to make profound reforms, you were simply going to moderate imbalances forward, in an agreement that was quite lax. In that sense, if politics had been ordered a little more behind that agreement, but it was something that did not happen. There is a part of the ruling coalition that is scrapping the agreement all the time, one might have seen another course.
High inflation in March compromised IMF projections for 2023
We always say, it is true, there is an IMF with which you have to comply so that it makes the disbursements and you do not enter into defaultbut on the other hand, it is the very limitations of reality that do not allow the government to make an expansive fiscal and monetary policy, lowering interest rates for example.
It is not only the IMF that imposes that, but the market that does not give you financing, the reserves that do not reach the exchange rate, the financing that prevents you from keeping the rates frozen. There is a part of the Government that says that the IMF is to blame.
The agreement was not consistent with lowering inflation, but it tried to order the economy so that you benefit. But the political expression that resolved Sergio Massa in August 2022, it was a necessary but not sufficient condition to avoid this turbulence that we are experiencing now, where the drought It is having a strong impact and the shock is conditioning all of the government’s economic policy this year.
MVB JL
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