Time is running out, options too

President Alberto Fernández with the managing director of the International Monetary Fund (IMF), Kristalina Georgieva

Beyond the official story, this will not be a year-end with good news. Poverty does not stop, inflation at record levels, investments and job creation that are not a reality and dollars that are practically no longer in the coffers of the Central Bank, or at least that is what their numbers show.

In the middle of this mess, we are days away from having to meet the last due date of the year with the IMF: a little more than 1.8 billion dollars that will leave (without a return date) pending an agreement with the agency that allow us to refinance about 45,000 million dollars, this refinancing that will surely be accompanied by a few years of grace so that surely within a not too distant time we will default again, forcing us once again to have to renegotiate what is also agreed on this opportunity. We suffer from chronic non-compliance.

The main challenge facing the Argentine Republic is to generate employment through investment and the promotion of the private sector.

The truth is that the possible agreement with the International Monetary Fund is not the end of the road, but just the beginning. Although the happy ending with the organization must carry with it a plan that implies the possibility that at some point we can honor our commitments, we know that this will be a cluster of good intentions that will not solve the real problems of the country.

From now on, the main challenge facing the Argentine Republic is that of job creation through investment and the promotion of the private sector, although for this to happen, structural reforms are needed that are far from appearing on the roadmap of Argentine politics. Job creation is what is important, what is truly critical.

Then there are urgent issues that must be resolved in the short term. Lack of dollars is one of them. Incredibly, in one of the countries that claims to have the highest amount of physical dollars per inhabitant, the BCRA is practically without reserves. The dollar hold and above all the exchange gap make the situation increasingly critical. On the one hand, those who export and generate the dollars have no incentive to do so: a dollar that has a value of around 200 pesos to the exporter is paid in the best case by 106 pesos (if they are lucky enough not to be subject to withholdings). On the other hand (following the same logic) the importer’s appetite soars: with a dollar around 200 pesos, nothing more desirable than importing by buying goods abroad with a dollar at 106 pesos. Even with the expectation that this exchange rate is below the value that it will one day reach, purchases are increasing above the usual.

Martin Guzman
Martin Guzman

The solution that the government has found to the problem of dollars is rudimentary simple and is based on simply not allowing absolutely no one to get hold of a few dollars, no matter the reason. If you want to travel, you are not allowed to do it (or at least not to the entire middle class who liked to travel abroad and their only possibility was to do it financed). If you want to import, the authorizations take time and often never arrive. If one wants to buy to save, it is not possible to do so in the official market.

Given the limited vision of the Government, this borders on perfection: I fleece the exporter, I buy the cheap dollars from him and I use them alone, without selling them to practically anyone. Although at some point within the Kirchnerist logic this could be auspicious, they make the mistake of forgetting a small detail: 80% of what is imported is linked to industry and production. A good part of the products that exist within the country’s borders have some imported component. Not allowing imports inevitably generate a deep stagnation of the economy and here they will have to make a decision: correct the exchange market and allow it to be imported freely or they will have to face the cost of a new brake on economic activity in a society that can no longer plus. There will be no growth if it is not allowed to import inputs, machinery and other goods necessary to grow.

The solution that the Government has found to the problem of dollars is rudimentary simple and is based on simply not allowing absolutely no one to get hold of a few dollars

The other great challenge that is urgent is to resolve (in what they call the “Multi-year Plan”) a budget that adjusts to the needs that prevail under the possible agreement with the fund: narrowing the fiscal hole. Understanding that you cannot spend more than you enter implies understanding that to pay debts we must have money left over. In practice, what the Minister of the Economy Martin Guzman The intention is to expose numbers more in line with a deficit of around 3%. The interesting thing is that this was achieved in part by adjusting the rates of public services (rates that are more than 100% behind schedule) and here they will have to pay the cost of the inflationary impact that these adjustments in the rate subsidies will generate.

However, the situation does not seem to matter to the officials on duty: They say that this year it will grow by 10% (they no longer take into account the brutal economic destruction that was caused during 2020), that inflation is going through a deceleration process (despite being around 50% annually) , and that next year the country will grow 4% (without absolutely no argument) and above all, the State is and will continue to be present.

Without too much support, one must have expectations and be optimistic that the level of delusion that prevails today in those who govern Argentina is not above the urgent need to face real, structural, serious and urgent problems once and for all and thus avoid what could be a new crisis of incalculable proportions in the Argentine Republic.


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