A woman in a supermarket in Buenos Aires.JUAN MABROMATA / AFP
Argentina is renegotiating its debt with the International Monetary Fund these days.
"The objective is to achieve a program that does work," says the Minister of the Economy, Martín Guzmán, whose political weight has increased in recent weeks.
The big question is the fiscal adjustment that the IMF will demand.
While inflation picks up (rose 3.8% in October) and the peso continues to falter, Guzmán affirms that the 2021 deficit will be less than the 4.5% foreseen in the Budget Law that will be approved next week.
The endemic crisis in the Argentine economy, exacerbated by the pandemic, seemed to end a few days ago.
The free exchange dollar or "blue", which had reached 195 pesos on October 24, fell to 149. But the calm was brief.
The rise in prices in October suggested that this year would close with an inflation of not less than 35%, the highest in the world after discounting the Venezuelan hyperinflation, and the “blue” dollar rose again to 172 pesos, a very remote change of the 80 pesos to which the official dollar is quoted.
"As long as exchange controls exist, we will have to live with that gap," said the minister, during a meeting with representatives of the foreign press.
The macroeconomic picture continues in an emergency situation.
For next year it is expected to finance half of the budget with monetary issuance.
With the two Argentine printers manufacturing pesos in 24-hour shifts, the Argentine government has had to order 400 million thousand-peso bills from Brazil (at a price of 20 million dollars) and 170 million thousand-dollar bills from Spain (at priced at $ 21 million).
Despite high inflation, the thousand-peso bill is the largest of the existing ones: at real exchange, it is equivalent to less than six dollars.
The Central Bank's reserves have already fallen below $ 39 billion, which, taking into account immediately non-negotiable securities (such as the “swap” with China) and those that constitute private deposits, is equivalent to practically zero.
Argentina needs a break and trusts that the IMF will grant it an “extended facilities loan” with which to immediately repay its debt with the institution (44,000 million dollars of principal and some 5,000 million of interest) to establish repayment terms relatively comfortable: it would start to be paid in 2024 and would end in 2030.
In his meeting with the foreign press, Minister Guzmán refused to speak of “fiscal adjustment”, resorting to a euphemism like “fiscal sustainability”.
He admitted, however, that he did not want to rush the deficit established in the budgets for next year (4.5%) and pointed out that his objective would be closer to 3.8%.
"You have to put the house in order at a speed that is feasible," he said.
He announced, as a saving measure, that the Emergency Family Income would cease to be paid, of which three rounds of 10,000 pesos have been disbursed to some nine million beneficiaries, with a cost to the public coffers close to 265,000 million pesos (plus $ 3.3 billion).
The cessation of this subsidy motivated by the pandemic will be compensated with more focused instruments and yet to be determined.
The most urgent thing now is inflation.
If in 2020 it reaches the expected 35%, it will have experienced a substantial drop compared to 2019, when it reached 53.8%.
But that is largely due to the drop in consumption caused by the pandemic.
In October, with the economy more active, prices have risen 3.8%.
And an upward trend is emerging in the coming months, due to the unfreezing of fuel prices and rates for services such as electricity or gas.
The rent of the house in pesos has already risen 50% so far this year.
It will be difficult to meet the 29% inflation target set in the budget law for 2021.
After continuous friction with Miguel Pesce, president of the Central Bank, Minister Martín Guzmán seems to have achieved hegemony in the economic team.
President Alberto Fernández has guaranteed him a certain control over monetary policy and even, according to information from the newspaper
Clarín
, a replacement at the head of the Central Bank as soon as negotiations with the IMF are finished, something scheduled for March or April.