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The political rumors that we have been anticipating from these pages are being fulfilled. We talk regarding probable cabinet changes. LThe crisis in the governing coalition is radicalized. The Wednesday the 13th the inflation data will be known, which would be between 5% and 7%, the higher, the pressures on Martin Guzman they will be stronger.
Last Friday there was a rumor regarding his departure, which was later dispelled. No one delivers a questioned minister, however, names are heard regarding his possible replacement.
Inflation and changes in the Cabinet: short but key week
How would this impact the dollar?
The market is going through a liquidity crisis, with which We do not believe there is room for a strong rise in the dollar.
Reasons?
Between March and April, the banks lowered their credit quotas one step and raised their rates, this implies that there is less financing in the market, liquidity has the face of a heretic, and more than one bank had to exchange dollars to meet capital needs. of work.
Anything else?
The government enabled joint express, This implies that wage increases will have to be paid in May and in some cases retroactive, money is not elastic, and there is no way to face the payment of salaries if it is not resorting to savings, which are generally in dollars.
The perfect Storm
In the months of May, June and July there are important tax maturities that generate a dissaving in the companies’ cash, to this add the bonus for July. Clearly we are facing a context of illiquidity that will not allow alternative dollars to seek a significant rise. In Private Report the projections of the value of the dollar to December 2022, following July the scenario is in favor of alternative dollars.
With current salary agreements, fourteen unions go to parity
How are the goals coming with the IMF?
The government passes the first review without problems, problems will come in the future.
What happens to inflation?
From our point of view inflation points to 70% per year, private measurements show inflation at 60% per year, with a devaluation rate of 50% per year, and a badlar interest rate of 44.5% per year.
Are we still behind in exchange?
It’s the government’s idea, so we don’t know how it will get the dollars needed to meet the demand for imports, plus those needed to pay debt, travel abroad, among other dollars from the exchange balance.
No gas?
Hoy begins a strike of truckers for an indefinite period, what we reported is not far from reality, the shortage of diesel makes the price adjust upwards, this complicates the setting of rates and the normal development of the activity. This complicates us financially because if merchandise does not arrive at the port, there will be no exports, therefore, dollars will not enter, withholdings will not be charged and the fiscal deficit is pressing, as well as the stock of dollars.
There might be a lack of gasoline at Easter, fuel dealers warn
Even Thomas Friedman in the New York Times mentioned the lack of fuel?
Argentina is a power in terms of grains, this will move prices in Chicago.
Is it time to fix prices on soybeans, wheat and corn?
Prices are not skyrocketing, the Federal Reserve will raise rates soon, the dollar will strengthen and oil is falling in price, it would be a logical sequence for agricultural commodities to go down. In Private Report a map of the price of soybeans, wheat and corn in Argentina and the world, the best guide to make decisions.
How is the consumption?
A good measure is meat consumption, in the year 2021 per capita consumption it was 47.4 kilosfollowing the first quarter of 2022 the slaughter is 4.4% lower than the first quarter of 2021 and a per capita consumption of 43 kilos is projected.
So?
Less slaughter, more animals in the field, few exports, swith all condiments so that there is less supply of animals and prices adjust to the rise. What we are experiencing is crazy, the stock of animals is growing and the price of meat is rising, this is only achieved by the Kirchnerist intervention policy.
What to watch this short week
It’s a short week the inflation data will be key Y there will be cabinet changes following Easter, yesterday the president’s son was born and everything will be postponed.
We do not believe that the changes will generate greater volatility in the price of the dollar. From our point of view, these alternative dollar prices are a floor and, when the price of the dollar is below the price of the solidarity dollar, there is no need to hesitate and buy.
The Central Bank should raise the monetary policy rate from 44.5% per year to levels of 47.0% per year, In this way, the rate would rise 9.0% in nominal terms from January 6, when it stood at 38% per year.
Everything this forces the government not to issue pesos, since this would imply an acceleration of inflation. Neither is the Central Bank in its sights to accelerate the rate of devaluation of the official dollar. Many analysts are enthusiastic regarding a rise in the official dollar, but we must be cautious, the Central Bank accelerates the rise, but then the Easter holiday arrives and with the passing of days the curve flattens. For this month we expect a rise in the official dollar of around 3.5% to 3.7%, no more than that. As we always say, at some point in the year the market will take matters into its own hands.
In April, inflation will be much higher than the rate of devaluation. We will continue with the logic that the interest rate will be higher than the rate of devaluation. We have insured foreign exchange delay.
In the world, the rate of return on 10-year treasury bonds stands at 2.75% per year, this will strengthen the dollar and push back the commodity market. Oil is already going down, rprofit-taking in agricultural commodities is likely.
Gas and electric power continue to be a threat to our economy. In 2021, consumers will pay 33% of the real value of electricity and 45% of the real price of gas. In 2021 we bought LNG at US$8.33 per million BTU, this year we are buying it at US$38 per million BTU. The price of Bolivian gas is paid in 2021 for US$5.88, today it is US$8.0 per million BTU. The incremental gas that would come to us from Bolivia might be worth US$18.0 per million BTU. A friend Eva.
This increase in the price of gas and electricity generates two effects, if the tariffs increase, consumption falls, if the tariffs do not increase, we will have more deficit and inflation. In one case or another the result will be stagnation with inflation.
There are many reasons for inflation to continue to rise and consumption to recede. If we add to this exchange delay, The conditions are in place for an economic slowdown in 2022.
* Economist and business consultant.
