Ezequiel Burgo
06/12/2021 23:00
Clarín.com
Economy
Updated 06/12/2021 11:00 PM
- What worries you most about the economy today?
- The dollar gap
- More than inflation? why?
-
When the gap collapses, the same thing happens with the entire economy
.
A jump in the gap is destabilizing while continuing with inflation rates of 4% is more of the same, we have already got used to living like this.
But 50 days ago the gap was below 60% and today it is over 70%.
Such a dynamic is the
origin of problems
and we are going to an election where we know that a portion of Argentines and companies will buy dollars.
The situation will get tense
.
- Does the Government have a back to avoid a flash with the breach?
-
I do not believe that the Government is in a weak situation
to face what is coming.
You have the ability to go to the elections smoothly and if you do things well, you
shouldn't have any shocks after the elections either
.
- That sounds optimistic then.
- Let's not confuse.
With $ 600 soybeans and a strong growing world, it doesn't take much to stabilize the economy.
But it's just that.
I'm not talking about a ten-year growth period awaiting Argentina.
I speak of the very
short term
, unfortunately.
"The agreements with the IMF are neither expansive nor contractive. What is expansive or contractive is the money that comes in."
- Can inflation lower for the elections?
- The rate will start with 3 and with 2.
- But...?
- The Government uses four anchors to contain prices:
wages, rates, exchange rate and public spending
.
In the last three months, all these four prices have risen less than inflation.
For the elections, salaries and expenses will be released.
And there for me is the dichotomy of the Government: the more it releases salaries and spending, the better for the activity and the better chances in the elections.
But more effort will have to do the other two anchors, dollar and tariffs, so that they do not eat a higher inflation before November.
- Argentina has been doing this for 15 years, what can go wrong?
- It's the other way around.
We always band.
We demand a lot from the dollar and we delay it
.
And then we have to see how we update it.
But to correct it, it has to be gradual, not shock, because Argentina has long been locked in moving the nominal exchange rate without automatically triggering inflation.
Until there is a program that tackles the inflationary problem head-on, the dollar cannot be updated quickly.
"It is the first time since 2009 that Argentina has a countercyclical fiscal policy. From 2010 to 2019, when the economy expanded, fiscal policy expanded, and when spending contracted it decreased."
- With what level of rates will be left after the elections as a result of this repression?
- They will come out of the elections with rates running below inflation, like the dollar.
But there is room to recover, because just as
Kirchnerism overtook them, macrism overtook them
.
We are not even close to a subsidy problem like 2015. This year will end with a 2016-2017 backlog.
In the worst case it will be 2.5% of the product.
- Going back to the gap, you say what worries you the most. What do you see: could the explosion of October 2020 happen again?
- It would be rare to repeat such an
obscene
economic policy error
less than a year from now.
Precisely the key to stabilization last year was to lower the gap.
- But go back up ...
- Yeah right.
I mean, last year it reached 130%.
Now it is not at that level but it rises and, I insist, it worries me because at this level it is again more attractive to pretend to
import things and not to liquidate exports
.
- What does the BCRA have to do?
- Assume that Argentina has a
de facto
split
.
The commercial dynamics of this economy go through the official market, and the financial one through the parallel.
In the same way that we learned over and over that a free dollar is bad when there is only one exchange rate, as in Macri's time, now we have to understand that a dollar administered in the official market and another free one is not a good idea. in parallel.
You have to manage the price of both.
In the official it is with controls and in the parallel with interventions.
Blue dropped from $ 180 to $ 140 selling dollars, it wasn't magic.
"When the gap collapses, it is the same as with the entire economy. A jump in the gap is destabilizing while continuing with inflation rates of 4% is more of the same"
- And then? Does the monetary authority have to intervene?
- The Central Bank has to assess that if it does not sell dollars now, facing the elections, it can enter a vicious circle because when the gap rises, the refinancing of the Treasury becomes complicated, and if that happens, then Guzmán's program will end requiring the Central Bank to issue to finance it.
It is best to cut at the first link and therefore these gap levels are not healthy.
In Argentina, this gap creates a problem in six months, not in six years
.
- If July 31 arrives and there is no agreement with the Paris Club, can the gap overheat?
- The market expects a formal arrangement or one of good intentions that postpones that expiration.
After the 31st, the countries have to meet and declare Argentina in default.
It is not automatic.
With which it will be easier for its members to say
"we are going to give Argentina more time since it has said that it is negotiating with the Fund
.
"
I hope that the Club will open a period of 6 or 12 months to reach an agreement with the IMF.
- When should Argentina reach a program with the IMF?
- Understanding how the Government thinks and what the country needs, it would be advisable
before
and not after.
- What do you mean before? Before the elections?
-
Earlier means as soon as possible
.
The further we get away from the post-covid recovery, the more likely the IMF will say
"well, the Covid passed and we have to adjust and devalue
.
"
On the other hand, at this moment, if Argentina goes to the IMF and says
“I want to fix but I cannot make a contractionary policy”
, the IMF should accept it.
It is better to use Covid as an objective element so as not to put together a program that will put us back in a recession and, incidentally, clear up the uncertainty about what Argentina wants to do.
"It seems to me that there is an opportunity to say how we would get the stocks out in five years. But not to do it tomorrow because we already know what will happen."
- But what does the Government gain by signing with the Fund? Wouldn't you run the risk that even with a program the market won't believe you? Lenin Moreno restructured the debt, signed with the IMF, and the situation in Ecuador only improved when a right-wing government arrived.
-
The agreements with the IMF are neither expansive nor contractive
.
What is expansive or contractive is the
money
that comes in.
Ecuador
moves to the rhythm of the price of oil, whether or not it has an agreement with the IMF.
When I speak of seeking an agreement, I am not saying it so that the economy expands due to a matter of expectations and the good vibes that it will generate in the market as happened to Macri in 2018, because we know that that does not work.
I mean
"look, I have this level of fiscal deficit, I have to spend more money and this economy works dollars, I need dollars
.
"
- And the IMF is going to listen?
- My agreement would be more
aggressive
than the most imaginative of the aggressive ones.
Go to the IMF, ask for money and spend it
.
You will have to promise something in return for when the Covid passes.
But Argentina needs more money from here to the elections.
Some will say that this money is for people to vote for the Government, others because people are returning home with the second wave.
I say it is a mix.
But if you face this only by spending pesos, the risk of injecting those pesos is high.
If, on the other hand, there is an agreement with the IMF behind it, which sends the dollars to support this action, it would be the first time that we can make the IMF, the government and the people happy.
- Sounds difficult.
- It is very easy to say, very difficult to do.
But as a conception, you do not have to go to an agreement that promises a fiscal adjustment that will improve
expectations
and investments will rain.
I do not say that.
I say go to the IMF, spend more money, finish passing the Covid and then we sit down again.
So far the IMF with Argentina has
hit it all
.
- When will there be a formal agreement with the IMF?
- A realistic agreement with the IMF will take longer and generate fewer benefits in the short term.
An easy agreement with the IMF, to shape the markets, will be words that are blown away by the wind.
But
here there will not be a labor reform like in Peru
and the point is to put on the table that Argentina has a particular union structure.
But there will not be an agreement with Peronism, the CGT and Los Gordos saying that there will be a labor reform to lower labor costs like Brazil, because it will immediately suffer from a failure.
- The theme is the meanwhile ...
- The economy will have to look for holes and reforms to recover.
My impression is that it is more important today for an investor to give him a horizon that he can get the dollars out of Argentina, than to promise him that the labor cost will go down by half.
There are
projects
that today are
profitable
at the Argentine cost but they are not done because there is exchange control.
- What is profitable with a dollar rate of 18%?
- Today if someone has to sink any investment, pay a dividend, whatever number you want, it is not known if you can pay it.
Today US $ 100 or US $ 200 million are brought to Argentina and it is not known when it will take them.
Let's not seek to make the entire economy profitable by lowering wages to zero
.
Let's give certain edges of
reasonableness
to sectors that are already profitable like energy or the field.
"Economists can draw an excel where tomorrow Argentina has a 3% surplus, reducing pensions by 30%. That works in the excel but not in reality."
- And in what time frame can it be achieved?
- An economy that suffered a similar crisis due to the effects of Argentina, and was even worse because the banks failed, was
Iceland
.
They had to put stocks and a gap of 130%.
And sign with the IMF.
It took eight years.
It seems to me that there is an opportunity to say
how we would get the stocks in five years
.
But don't do it tomorrow because we already know what will happen.
If the IMF says that in five years Argentina will be able to pay the debt but in five years we will continue with stocks, then what the IMF says is a lie, that we could pay the debt.
With what money?
The example was given by the president himself when he said that the stocks are like a revolving door: nobody leaves and nobody enters.
- How does the Guzmán-Basualdo fight impact the management of the economy? Does La Cámpora have power?
-
It is the first time since 2009 that Argentina has a countercyclical fiscal policy
. From 2010 to 2019, when the economy expanded, fiscal policy expanded, and when spending contracted it shrank. Covid is coming and the Government raises the deficit to 6.5% of GDP. Today the product almost recovered to the precovid level and public spending is below the Covid level. Some say that Guzmán is
orthodox
for that reason, but the truth makes little sense to have the same level of spending as when 70% of the economy is closed.
The IMF may have many doubts, but Guzmán can also affirm that the spending is managed by him.
Which one has doubts?
Sure, you thought you would see less subsidies and more public works.
The mix within spending will end up differently.
But the spending management profile was conservative as the economy recovered.
- But is it reasonable for La Cámpora to tell Guzmán what to do with the subsidies and not pay the IMF?
- It does not seem reasonable to me that those of us who are outside find out by watching TV or reading the diaries of those discussions.
Because as a saver, worker, businessman or whatever, I am going to ask myself in three months if electricity will be more expensive or cheaper, if there is an agreement with the IMF or not.
All that does not work because it is a coin in the air and one day one appears on TV saying one thing and the next day another telling a different one.
If there are two people from the Government who fight inside an office, I am not scandalized if they announce the same thing later.
When I was in the government of Cristina Kirchner, we had differences within the economic team, there always are.
But what I say is very damaging for an economy that has been zigzagging for a long time.
Background
Emmanuel Álvarez Agis directs the pxq consultancy.
The interview with the
Economic Supplement
was at his office in Palermo.
Vice Minister of Economy between 2013 and 2015, now he changed counters.
He makes a special recognition to
Miguel Bein
, who died a few weeks ago and who had also been Vice Minister of the Economy.
“It was the
consultant of consultants
.
The
best analyst of the Argentine economy
.
Every time I had a question, I called him and he spoke generously to me.
He was always right, not me
.
"
The conversation was at a large table, meters from his desk.
Along with his annotations are two books:
The Age of Turbulence
, by
Alan Greenspan
, and
The Courage of Acting
, by
Ben Bernanke
.
"I'm addicted to reading central bankers
,
" he says
about his current reading moment.
Greenspan and Bernanke were the chairmen of the Federal Reserve who went through turmoil in the 1990s and 2000s.
--To what extent do economists in the public service implement what they think should be done and not what the government leaders impose?
- Argentina amplifies trends.
In the 1990s we had financial globalization, the fall of the Wall, privatizations and technocracy.
The maximum expression of that was
Domingo Cavallo
.
- And is technocracy bad?
- The technocrat became a candidate and someone more important than the president.
If a person comes to Argentina and puts inflation at 5% or fixes the debt or makes the economy grow or promises all that and does it, they are going to say to fix Justice, health, everything.
Something like this happened with Cavallo and
Roberto Lavagna
, both were candidates.
But then we went to the other extreme.
There were finance ministers between 2003 and 2015 whose names we do not remember.
We went from the supremacy of the technocracy to the phrase
"I am the minister of economy" by Néstor Kirchner
.
And with Macri that was even worse.
- Because it happens?
- Economists can draw an excel where tomorrow Argentina has a 3% surplus, reducing pensions by 30%.
That works
in excel but not in reality
.
If you don't understand the union framework, the social movements, that soy is exported and the limits to economic policy, you are a bad minister.
- But politics makes a bad decision by doubling the size of the state in ten years.
- Totally. The minister has to tell the president:
"Look, this is the court and you can play in the middle, to the right or to the left
.
"
But the economist has to know how to tell him:
“Do you want to raise pensions? With these conditions it is possible to increase them 8% and such a thing happens. I can't raise it 20% or lower it ”
. But there are colleagues who tell Alberto Fernández:
"The problem here is that there are three points of spending left over
.
"
And that's half of retirees. That court does not exist. You have to understand that after many years of recession and high inflation, short-termism got us into a
trap
but not because we have a gene but because people and companies say
"I have already made the effort all this time"
. And the reason why a
consistent
stabilization program
is not carried out is because it is like the subways: it
is inaugurated by one president and finished the next
.