In the last weeks before the PASO Sergio Massa managed to close the agreement with the IMF, who decided to unify the fifth and sixth reviews, the next one will be held in November, that is, after the general election and in the month of the second round if necessary. The approval of the Board of Directors of the multilateral organization is still pending.
The disbursements would arrive in August after the PASO and in November. This pact gives him some time so that the elections can be carried out with some calm, although without extra funds as the minister expected. The next maturities with the organization will be paid, according to the ruling party, with yuan and CAF funds. The question is whether this pact is enough to get through the electoral period or whether the candidate minister may lose control of the economic situation. Storm fronts abound: dollar drought, inflation and a slowing economy. Recession, devaluation and acceleration of prices are an explosive combo that will exacerbate the social crisis with more poverty and the collapse of the purchasing power of the working class.
The precarious economic situation unfolds in a global context that is not very encouraging. According to the latest IMF “World Economic Outlook” report, countries continue to gradually recover from the covid-19 health crisis and the impact of the war in Ukraine, but “many challenges still cloud the horizon and it is too early to celebrate,” “global activity is losing momentum,” said IMF chief economist Pierre-Olivier Gourinchas. Among the problems that the organization warns about is inflation and financial stability (after the bankruptcies of the banks in the United States). According to the Fund’s projections, the global economy will grow less in 2023 and 2024 than in 2022: it will drop from 3.5% to 3.0% in both years. Meanwhile, for Latin America and the Caribbean, a stronger drop than the world average was calculated from 3.9% in 2022 to 1.9% in 2023 and 2.2% in 2024.
For its part, the new rate hike by the Federal Reserve affects Argentina because the dollar strengthens and the prices of raw materials fall, which is one of the main export products.
The Fund and the Government responsible for more inflation
Inflation for July will be known the week after PASO. The consultants project that due to the jump in the blue dollar there will be greater pressure on prices, and mainly in August due to the measures applied by Massa for the agricultural dollar for regional economies and corn, which will affect the value of dairy products, eggs, meat , and the chicken; and the PAIS tax for imports, which make imported inputs more expensive.
Consultants calculate that August inflation could jump to 8% or something else. Equilibra forecasts a consumer price index for next month of between 7% and 8%. C&T Asesores Económicos project 7.2% for July and consider that 7% is the floor for the coming months, the Orlando Ferreres Study Center forecasts a floor of 7.5% for the coming months.
Last week the IMF projected that inflation in the country for this year will close at 120%. The agreement with the Fund, as denounced by the Left Front, is inflationary due to its demands to increase rates for public services and to increase the exchange rate that impact prices. In the latest statement from the multilateral organization on the fifth and sixth revision of the agreement, it insists “update energy rates” and that the “crawl rate will continue to be used to preserve competitiveness and support reserve accumulation objectives”, refers to continue with the mini-devaluations of the official dollar made by the Central Bank. So, the government of the Frente de Todos and the IMF are responsible for throwing more gasoline on the fire, the consequences of inflation fall on the popular majorities.
Agreement without extra funds
Reserves are at alarming levels. In June there was a sharp drop, according to data from the Central Bank, due to the payment to the IMF of US$2,683 million and there were no income from disbursements from the agency. According to specialists, the net reserves of the monetary authority are close to US$7 billion in negative. This value is reached by comparing the Gross Reserves minus the BCRA debt in foreign currency, that is, it is using dollars that are not its own. The Fund relaxed the reserve target, but it is still maintained at a demanding level (accumulation of cumulative net international reserves of around US$1 billion by the end of 2023) given the current precarious situation.
The IMF would disburse US$7.5 billion to cover the pending maturities with the agency, but there are no additional funds as Massa expected to intervene in the exchange market and face a possible exchange run in the middle of the elections. However, the multilateral organization authorized the Central Bank to intervene in financial dollars in “disorderly conditions.” Surely the Government will once again lay hands on the bonds of the Sustainability Guarantee Fund (FGS) of the Anses. A fund whose function is to guarantee the payment of retirement and pensions in case of contingencies, but they use it to intervene in the exchange market. Or Massa will have to appeal to the swap with China, convert it to dollars for the exchange intervention. Will it be enough to contain sudden increases in the exchange rate or will a devaluation be imposed? Wait and see.
Wages keep losing and the IMF targets them
The IMF kept the primary fiscal deficit target of 1.9% of GDP unchanged despite the drop in collection income due to the drought and for this it suggests a greater adjustment. In addition, it suggests “containing the growth of the wage bill”, increasing rates and social programs.
Attacking the salary is not new in the Fund’s recipe book. The specialist Noemí Brenta details in her book, “History of relations between Argentina and the IMF”, that in each adjustment plan of the Fund there is a blow to wages. Thus, the Stand By agreement during the civic-military dictatorship of 1976, without euphemisms like the ones the Fund usually uses, demanded a decrease in real wages, a decrease in the power of workers. As of that year, real wages “remained below the initial level prior to the launch of the plan.”
Wages have been losing by a landslide for years with the complicity of union leaders, even the CGT, instead of fighting to recover what they lost, prepares an act in support of Massa a few days before the PASO. According to data from INDEC, Since the IMF returned to the country at the hands of Macri, the purchasing power of registered workers has plummeted by 16% and that of unregistered workers by 43%. For the Fund and the owners of the country it is not a sufficient loss, they always want more.
The “hard” renegotiation with the IMF is not an option, the debt is a mechanism of domination and looting of the imperialist powers. That is why the left proposes to reject this debt scam. What it is about is once and for all to put an end to these mechanisms to allocate resources to popular needs.