The Minister of Economy, Sergio Massa, once again manages to kick a problem forward. This week the FMI would announce changes to the agreement signed with Argentina just a year agothe goal in sight is the accumulation of reservations affected by drought and war in Ukraine.
Massa met with the head of the IMF, Kristalina Georgieva, at the G20 finance ministers summit that took place in the Indian city of Bengaluru. Meanwhile, a technical team made up of the Vice Minister of Economy, Gabriel Rubinstein; and the head of advisers of the Palacio de Hacienda, Leonardo Madcur held meetings with Fund officials to obtain the technical approval of the fourth revision of the agreement.
If the changes in the goals of the agreement are confirmed, Massa could get a breath of fresh air in an election year and with an economy tied up by wires. For his part, the minister is negotiating another relief with the banks and insurance companies to exchange the debt bonds in pesos to postpone the maturities that would take place between next April and July.
Massa, applauded at the opening of the legislative sessions, still dreams of being a candidate for president and the Fund’s announcement contributes to that because it adds some stability to the economy. However, economic activity fell for the fourth consecutive month and the projections released by the Central Bank (REM, February) anticipate a real variation of the Gross Domestic Product (GDP) for 2023 of 0.0%, a brake on the economy; inflation continues to rise, wages lag behind after years of decline, and a few continue to earn. A combo that could thwart Massa’s candidacy.
the dollar again
At the end of this year, the Government had to meet the goal of US$ 12.4 billion in net reserves from the Central Bank. The Ministry of Economy calculated that the war in Ukraine generated a negative effect of US$ 4,940 million in Argentina’s trade balance due to “a general shock of international prices in the agricultural sector (soybean 9.4%, wheat 33.7% and corn 17.8%) and on the price of fuels (Bolivian Gas 114%, LNG 233% and Diesel 85%)”. According to the report, more foreign currency was required to import fuels, and it argues that although the price of grains increased, there was also a rise in the prices of imported fertilizers.
In addition to the increase in fuel, Because the country is a backward and dependent economy, it requires other imports for the industry. This is not mentioned in the official report. Thus, in 2022, capital goods (machinery, computers and telephones, industrial transport equipment) and intermediate goods (pharmaceuticals, basic food and beverages and those manufactured mainly for industry) represented 52% of total imports, while fuels and lubricants accounted for 16% of the total. In 2022 the trade balance (difference between exports and imports) was $6,923 million, which fell by 53% in relation to 2021. In January of this year, after three months of trade surplus, a trade deficit of U$S 484 million was recorded, explained due to a drop in exports (-11.7%), especially wheat and corn.
Meanwhile, the drought affects exports as reflected in the data for January, this means a lower income of dollars. According to the Rosario Stock Exchange, “in the core region, with a normal climate scenario, it was expected to produce 19.7 Mt of soybeans. (…) At the moment, it is estimated that the harvest will only be 33% of what was expected at the beginning of the cycle. Compared to last year, which was considered the worst campaign since 2008/09 with 13.5 Mt, the 2022/23 cycle would even leave only half of that volume of soybeans.” Agrarian employers take advantage of this situation to demand greater benefits from the Government, including one soybean dollar (part 3). As reported by the Chamber of the Oil Industry of the Argentine Republic (CIARA) and the Cereal Exporters Center (CEC), entities that represent 48% of Argentine exports, in February companies in the sector liquidated US$ 644.9 millions; representing a drop of 74% in relation to the same month in 2022, and 30.5% less than in the month of January 2023.
At the beginning of the year, Massa was expected to announce a Repo-type loan, by international banks with bonds as collateral, but there were no news. The minister will have to deal with a lower inflow of dollars and strong pressure from the industry and large companies that demand foreign currency.
This weakness in reserves was not magic, it must be remembered that the Government let the dollars drain in: payment of interest on the debt, cancellation of financial loans of public and private debt. This was indicated by a study carried out by Cifra de la CTA: “In total, 29,814 million dollars left through this route between 2020 and June 2022.” Debt again. This year began the debt interest payments to the wolves of wall streetpact that Guzmán closed in 2020: in January interest was canceled for the equivalent of US$ 1,022 millionaccording to the Congressional Budget Office.
Without taking substantive measures to avoid the loss of dollars such as a state monopoly of foreign trade or the nationalization of the banking system through the expropriation of private banks and the formation of a single public bank, under the management of the workers (among other measures), the bleeding will continueas well as the pressures to devalue whose consequences will fall on the working class.
heat wave in prices
The Minister of Economy maintained that his objective was to lower the inflation for april. The prices in the street have a higher temperature, January meant a blow to the plans of Massa and February follow the same path, around 6%.
The consulting firm Analytica projects 5.8% for February; C&T Economic Advisors, 6.2%; Ecolatina, 6.3%. The Central Bank released the Survey of Market Expectations (REM) and inflation calculated in February is 6.1%. The prices were influenced by increased meatlas prepaid fees and the electricity rates. There is official responsibility for the increases in prepaid and public services, services that are not even of quality as was observed with the blackout last week.
This month the start of classes also pushed up prices, Fair Prices were not reflected in stores and many households juggled to complete their children’s backpacks, and in other cases they could not even buy a new one because there are backpacks that cost $35,000 , an amount that exceeds the amount of an Enhance Plan ($34,750).
Next week, INDEC will release inflation for February. Prices follow the heat wave. The agreement with the IMF fuels this increase with its recipes for raising electricity and gas rates, increasing the official exchange rate, and these demands are not made more flexible. Inflation is the privileged mechanism for adjusting the budget and income of the working class. Nothing good will come of the workers, the workers hand in hand with the Fund, it is not enough to loosen the rope for this year, the agreement must be rejected.