Ezequiel Burgo
08/08/2020 - 23:05
- Clarín.com
- Economy
- The agreement for the debt with the bondholders was closed, what does it mean and what remains to be defined?
- Clears doubts, but it will have to be complemented . Missing? There is still work to be done between now and August 24 on the legal details of the exchange, which are not minor. There are important differences that I hope can be resolved and if the 90% acceptance target is exceeded, that will mark an opportunity to start building a new project.
- What do you mean by “important differences”?
To the inclusion of the clauses of the securities issued in 2016 in the restructuring. Mainly so that the majorities can impose that Argentina does not suffer subsequent litigation. The key is not to have holdouts in the future as the country suffered from 2005 and 2010 after those exchanges.
"Argentina needs to have a project with three fundamental axes: the stabilization of its macroeconomy, the modernization of its productive apparatus and knowledge-innovation to achieve export development."
- How would you rate the agreement: the best there was, the one that was possible, the one that was given?
It's a very good agreement , I don't know if the best one, but a very good one. The time used up to the first offer could have been optimized because we saw a more constructive involvement of the parties later. I am one of those who believes that in negotiations you have to be tough in content and diplomatic in ways, and here it happened rather the other way around: tough in form and ended up giving up US $ 16,500 million to reach an agreement. The arrangement avoids greater evils for the Argentine economy, such as a deepening of the recession and the fall in employment that we are already experiencing. It also opens the door to investments because the provinces and companies with debt in dollars will now be able to clear their financial horizons.
- He said that the agreement clears the doubts but ...
It will have to be supplemented. It is an opportunity to mark a new beginning for the country that allows the construction of a comprehensive and national economic project .
- Do you have to show an economic plan?
I prefer to leave the semantics plan or no plan. Let's say that Argentina needs to have a project with three fundamental axes: the stabilization of its macroeconomy , the modernization of its productive apparatus, and knowledge-innovation to achieve export development . And for this the important thing is to give a clear signal of where you are going, that's all. Is Argentina going to stabilize its macro imbalances? I think and I believe that it has to stabilize them. Will Argentina propose normative-legal changes that allow us to modernize our productive structure and export development? I would say that this is the way to start.
- A definitive plan
Back, the important thing is to show where you are going. If that is to be called a plan or a program, it is semantic and I don't care. For example, I use the word project. But going to the substance, if we talk about stabilization, the reality is that we will emerge from the pandemic with a fiscal deficit of 7.5% of GDP and for this it will be necessary to propose that the fiscal, financial and monetary paths converge instead of distancing themselves . Here everyone can have their look at how to do to achieve it and that's fine. Mine is for Argentina to present a multi-year project to extend the horizon because a one-year path is not enough to clear up doubts. It would accompany it with a Macroeconomic Stability law that marks the convergence of other important variables such as public sector wages and the rest of spending. But this is my opinion and does not claim to be the revealed truth. Here the key is to show a course because Argentina starts from a very high nominality of spending with significant inflationary risks and the path of stabilization must be four years and with accountability.
The dollar? It will depend on whether in the coming weeks we see a project that marks a trend or path towards where Argentina is going. And it will also depend on the demand for pesos that remains firm. "
- What do you mean by accountability?
-To render accounts on a quarterly basis before Congress. If there are deviations from the goals, necessary measures must be taken to return to it.
- How do you grow back?
-The economic growth project must be supported by tax and credit incentives. But the base must be innovation and knowledge, working on manufactures in agriculture, industry, design, hydrocarbons, and mining. The key to sustainable development is to generate the dollars to supply the productive sectors .
- With Kirchner it was soy. With Macri they talked about the services. What could be the activity that helps to recover Alberto Fernández's Argentina?
-Kirchner and Macri did not have such marked macroeconomic imbalances. The stabilization of the variables today seems to me central so that the sectors that I mention can develop. But beware. There may be a temptation for Argentina to leave with four or five sectors and that is not the case because what the pandemic reveals is the extremely high informality of our economy. And it is not enough with four or five sectors to lower the participation of the black activity of this country in the total of the economic branches.
- Stabilize and modernize. It seems like a journey similar to the one Menem did in the 90s, is that what Argentina has to do?
-There were three economic teams that had an integrating and transforming vision of Argentina: Juan Sourrouille's in 1985 , Domingo Cavallo's in 1991, and Roberto Lavagna's in 2002 . Of these three cases, one can draw different conceptual examples but I would not say that what is coming is like 1991 because this crisis is not like anything, neither in Argentina nor in the world. You have to think of solutions 'outside the box' as economists say, outside the traditional.
"The reality is that we will emerge from the pandemic with a fiscal deficit of 7.5% of GDP and for this it will be necessary to propose that the fiscal, financial and monetary paths converge instead of distancing themselves."
- Do you have to worry about the weights that are turning?
-A Central Bank produces currency and must look at the supply-demand of money to stabilize prices. It is also clear that the only tool that Argentina had at hand to put a network to this crisis was the monetary issue. Now, the Central Bank's assistance to the Treasury so far was $ 1.35 trillion and it undoubtedly had the advantage of an increase in the demand for pesos as a result of the starting point: there were few pesos as a consequence of the zero emission approach of the IMF program as of September 2018. In addition, the pandemic gave rise to a precautionary demand for pesos that will not be sustained when the productive sectors start operating with the new protocols. In fact, in June and July the amount of banknotes held by the public, deposits and savings banks in relation to GDP stagnated. Until then, this indicator had been rising. In short: we have one semester ahead of monetary issue and the key will be that the demand for money continues to increase so that we do not see an impact on the prices of all these pesos that are going around. That is why it will be key to define a project that gives confidence.
- What will happen to the dollar gap between the official exchange rate and the blue?
-When I was studying Macroeconomics at the University of Buenos Aires, a macroeconomics professor, Adolfo Donadini, said “guys, when you have a difficult question, the correct answer is 'it depends'” .
-Does it depend on whether the gap rises or falls?
-It will depend on whether in the coming weeks we see a project that sets a trend or path towards where Argentina is going. It will depend on the demand for pesos as I just said. It will depend on the instruments available in pesos to save. It will depend on whether there is more supply of dollars. In short, only if all this is achieved can the exchange gap narrow.
- How much inflation do you see this year?
-In December it would be 38% year to year .
- Is it sustainable? Does it go up or down in 2021?
-We see upward tension in prices for later.
- What program will the country sign with the IMF?
-It will be discussed whether to go for an Expanded Facilities loan that clears maturities for ten years or a new Stand By that opens a horizon of only five years. The first requires quantitative goals and reforms, the second only objectives.
- Has the Monetary Fund changed?
-The IMF has a fiscal vision in the management of the economy that if you ask me I think it is important but it is not central. The key in all this is that the Fund is willing to give the country more time to balance fiscal accounts and that is perhaps the main concession it makes to Argentina. No one can expect the country to resolve the tax from one year to the next as it was intended to do with the previous program. That was a mistake. But the concept of the body did not change, it is predominantly fiscal .
- See a quick deal?
-Not. If it took eight months to resolve a restructuring that did not have conditionalities from creditors, a new program with the IMF may take time and increase uncertainty about the dollar. That is why it is important that Argentina go to the IMF with its own economic project and not return with one from there . One of the great problems of the past has been that most of the programs ended up being made in Washington, perhaps due to the dynamics of the times and the urgencies, and that meant mediocre programs . Today a mediocre plan would put us in just five years at the level we had before this recession. In Washington one can discuss on the sidelines what changes to make or adopt, but if one leads a project it is better and if it is supported by laws, even more so. To generate confidence, it should have the support of the ruling party and the opposition because if not Argentina it seems that one year it goes by route 9 to Rosario and the next by route 2 to Mar del Plata.
- Has Cristina Kirchner vetoed it as they say?
-I didn't bother to corroborate that. The country can be helped from many places.
- You went through the CNV, the Foreign Ministry and the Central Bank, do you see yourself one day as Minister of the Economy?
-It is a time not to think about personal projects but together because this crisis changed all paradigms and you have to think about how to help.
"One of the great problems of the past has been that most of the programs ended up being done in Washington, perhaps because of the dynamics of the times and the urgencies, and that meant mediocre programs."
- You haven't talked to the President for a long time?
-We have not talked for a while. But we chat periodically.
The dollar, inflation and the fate of the United States
For Martín Redrado, former president of the Central Bank and who today works at Fundación Capital, there are specific lines of work that could help contain and reduce the exchange rate gap.“We must be more proactive to generate savings channels that allow the development of the capital market in our currency . For example, deduct everything that is invested in life insurance or withdrawal from Income Tax if it is placed in securities in pesos. Another two elements to shorten the gap is to generate more foreign currency because the net intervention of the Central Bank has been negative in recent months. The key is to increase the supply of currencies and for that the swap with China could be used so that no less than half can be convertible to dollars, and to work with other Central Banks in the world that have swap lines, for example, the banks of Mexico or the European Central Bank . Finally, work with exporters to generate or expand export financing lines ".
- You say that inflation this year will be lower than in 2019, but you see it rising towards the end of the year, will the rate return to 50%?
- If nothing is done, yes. We do not know if inflation will be anchored at the same levels of 2019 because the devaluation and a program with the IMF had an impact there that never understood that this economy is bimonetary. But let's say that currently only a third of CPI prices are moved by supply and demand . The rest are frozen or tied to cared or capped pricing programs and none of that is sustainable. That is why I propose a program to reduce the nominality of the main variables of the economy managed by the public sector. Everything must converge to a path that will lead us to single-digit inflation in five years .
Redrado thinks about a pro-investment tax reform creating incentives for the reinvestment of profits and that it is necessary to invest more to export more. “If the GDP grew more than 3%, a good rule would be that investment in R&D should also grow until it reaches 1.5% of GDP. Today it is 0.6% ” .
Finally, what can happen in the United States: its economy collapses and Wall Street flies? "USA. It has the great advantage that its currency is a reserve and has no competition. Now the Federal Reserve is ready to do whatever it takes: it buys everything that walks. Alan Greenspan was the first to put these packages in at the time, Ben Bernanke developed them and now Jerome Powell has deepened them ”.
Right now
A project My next book "Argentina Primero".
A dream A country without cracks.
A memory My graduation from Harvard with my parents.
A hero Carlos Pellegrini.
A Neapolitan Milanese meal .
A Lemonade drink with mint and ginger.
A book "The integral humanism", by Jacques Maritain.
A person who admires Ben Bernanke.
A pleasure to travel.
A movie "The remainder of the day."
A Golf sport .
A place Saint Petersburg.
A series Suits.