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The snowball effect of debt in pesos is increasingly challenging


The Central absorbs pesos to avoid feeding inflation or raising the dollar. Thus, it places liquidity letters and makes passes in the banks. Between Leliqs and passes there are $10.6 trillion that accrue interest higher than inflation.

In January the curtain was drawn again and the king was once again left naked under the paradigm that the government

lacks dollars and has excess pesos.

The shortage of foreign currency deepens again with a Central Bank as a net seller of foreign currency in a month in which the settlements of exports from the field were lower as a result of the


and the anticipated settlements for

soybean dollars

at the end of 2022.

With soybean dollars 1 and 2 (a 43% increase in the dollar sector), Minister Sergio Massa demonstrated that without dollars he is willing to partially devalue to avoid a general exchange jump.

Thus, it was achieving foreign currency by leaps and bounds, but now it is once again reaching the edge of the springboard and in the face of a vacuum it is generating expectations about an attempt to obtain a loan guaranteed by bonds from international banks (JP Morgan and Goldman could participate) which, for the market analysts, it would be very expensive.

But the government seems not to care about costs, or at least this is demonstrated by the level of


generated by the Central Bank's debt, which in December reached an oppressive level.

The Central

absorbs pesos from the market

in the attempt that the surpluses do not feed inflation or raise the dollar.

For that, it places liquidity letters and makes transfers in the banks and pays interest of 75% and 72% per year respectively.

Between Leliqs and passes they add up to $10.6 trillion

and feed a snowball effect, accruing interest higher than inflation, which constitutes a challenging source of issuance of pesos.

For these "remunerated liabilities" in December some $640,000 million were generated which, and here comes an important piece of information, exceeded the $500,000 million Treasury deficit.

In other words, Massa made the adjustment in the second part of 2022, grinding retirements and subsidies in order to comply with the agreement with the IMF.

But, through another window, he injected and will continue to inject a significant amount of pesos that is poured into an economy with an inflation floor of 5% per month.

This snowball, which is generated by wanting to avoid a devaluation, is boosted in the first part of the year by the maturities of the public debt that, up to now, the government has been surpassing week by week.

In January, $304,491 million expired and in February the figure drops to $272,389 million, but the mountain to be covered rises to $709,730 million in March and in April it jumps to $1.9 trillion.

It remains at that level in May and June to

jump back to $3.3 trillion

in July, the month before the PASO internal elections.

The harsh document of

Together for Change over

the weekend focused on this point by stating: "during the government of Alberto Fernández, the indebtedness had a record increase: it already grew by the equivalent of

US$83,000 million

" and warned about the "extreme vulnerability that it will leave in the economy" for the next government.

Until now, Massa has been complying with the maturities of the debt in pesos, but there is a delicate side to his actions to pay attention to.

The economist

Carlos Perez

, director of Fundación Capital, warns about "the fact that a discrete jump in the official exchange rate can be avoided and the restructuring of the public debt in pesos does not mean that

higher inflation and an exchange gap

are avoided as long as there is more financing with monetary issue".

In other words, far from being self-constructed inflation, the issuance of pesos is filtering from various sides and the "wall" of July, which prevents extending the terms to place debt, is fortified by the heat of political definitions with a view to the year-end presidential election.


figure used by the opposition of "postponing funding solutions and resorting to short-term measures that

lengthen the fuse at the cost of enlarging the pump

" revives the idea that, before being a possible candidate for the ruling party, Massa must give signs of being able to lower inflation and lay the foundations for another "platita" plan before the PASO, as sectors of the ruling party are already demanding


On that point the outlook darkens.

In order to meet the 2.4% deficit of GDP that was presented to the IMF, the government had to reduce spending by resorting to inflation to lower pensions, subsidies and transfers to the provinces in the second part of 2022.

But he was also helped by higher revenue from dollar soybean withholdings and some cosmetic bookkeeping postponing spending for this year.


The Capital Foundation maintains, "in order to meet the goal of 1.9% of GDP for primary red committed to the IMF, the adjustment should be for 1.1% of GDP, in a context of falling income due to drought and less activity".

Thus, while the government resists a devaluation, the

interest rate

 began to act as the main attraction for the pesos.

With the reference rate at 75% per year, equivalent to an effective rate of 107.35%, the money is concentrated in the Ledes del Tesoro bills, in the bills indexed for high inflation or in the Leliqs of the Central Bank.

Everything to feed a snowball with weights with an uncertain end.

Source: clarin

All news articles on 2023-01-31

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