We analyze with the economist Sebastián Menescaldi, associate director at the consulting firm Eco Go, the latest movements in the economy and the perspectives that are opening up, in the current situation and for the immediate future.

Por Rodolfo Pollini

How do you see the Argentine economic scenario, with agreement with the Fund and the addition, later, of the war?
The agreement with the IMF was a little better than expected, because there are a little more dollars behind it than expected. The first disbursement received was 9,800 million, of which 2,800 went to cancel debt. This helped a little more to the recomposition of net reserves, which went from being negative by 500 million to positive by approximately 6.8 billion. The agreement tries to avoid a further deterioration of Argentina and establishes the deficit, monetary financing, reserves and what to do with tariffs. It sets limits that were already set in January before the war began, but with the war some things became complicated, such as the fiscal framework.

Will the fiscal and monetary adjustment continue as planned or will it be subject to review?
You are going to have to calibrate the model, because you are going to have more inflation and probably less growth, but the goal has to be the same, so some actions are going to have to be taken. The promised reduction in subsidies, of 0.6 points of GDP, is probably not going to exist and it is possible that spending on subsidies will increase this year because the rate increases are not enough to reduce them. Perhaps part of this will be saved with higher income due to inflation, part will be liquidated from pensions and some of the adjustment could be paid by the provinces, via transfers or with less works. The program tends to strengthen the Central Bank's balance sheet, so that there are more reserves and fewer pesos are issued. It is necessary to see if the Government can implement the measures to reach that goal. We have already seen what happens to raise rates, even below what inflation increases. In reality, rates are going down in real terms, but there is a political mess that does not allow progress and the market is beginning to see whether measures will be taken or not.

What do you think is going to happen to the exchange gap and how does it fluctuate, for example when the parallel dollar had fallen and in the last days of April it rose a lot again?
The gap was at 120% before the understanding, at the end of January. What I saw in the April movement was a correction within a very small market where any change in the trend, especially if it is for capital outflow, strongly affects the price. The gap will be between 70% and 90% in the next three or four months and with volatility. It shrunk from what it was. We are going to be within those margins, unless there is a political complication. Starting in February, many dollars entered to carry trade with the peso rate, it beat inflation and it was expected that the financial dollar would fall. That's what happened, but when someone wants to leave, everyone wants to leave and that causes an excess of demand for dollars over the little supply that there is. The gap is not something that worries me today.

Don't you see a context like that of 2018?
No. In that period there was a lot of short-term debt in the hands of foreigners. In 2019, two-thirds of the short-term peso debt was in the hands of foreign funds. Today that must be 20% or a little less.

The outbreak of inflation in the first quarter of this year had as a counterpart very high parities that will be reviewed later. Could this lead to more inflation and the need for new joint ventures later?
There was an implementation error. Inflation rose partly because of the war, partly because other prices began to be unfrozen, there were increases in electricity and gas rates, fuel prices began to be recomposed and there were increases in education, health and communications. The 4.7% in February was scary, the 6.7% in March was much more scary and was reinforced because the week that the Government announced the beginning of the war on inflation, food prices increased 4%, four times what they increase in general. The Government called joint ventures and gave the bonus. The bonus was good, but I think the joint venture thing was a hasty decision, which could cause problems. Commerce closed with a base of almost 60%. If you had any chance that from now on inflation would drop to 3% or 3.5% monthly, you ended up condemning it to a floor of 60%. At the beginning of March we had a price forecast for the month of 5.3%, because there were almost one and a half points of deregulated prices, but with the Government announcements the prices skyrocketed. We are going to have higher inflation between now and the end of the year.

How much do they estimate it?
In 70%.

Is what was granted to offset the impact of inflation in the first quarter on income going to be financed with issuance?
It will probably end up being financed partly by inflation, partly by higher export duties and some social security. The downside is that there will be fewer works, the subsidies will be the same and retirements will probably fall, because having higher inflation than last year, the update formula implies that the weight of retirements in spending will decrease.

To speak to those who go out every day to sell, how does this scenario impact consumption?
We do not see consumption recovering this year. Inflation is going to be high and imports are going to be complicated, because there are no dollars.
The Central Bank has to buy dollars, unlike last year when 12 billion were consumed to maintain activity. What we saw last year in consumption and family income was a flat first semester and an increase in the second. This first quarter they fell 1.5% and will probably fall later. We do not have dollars, due to more demand, due to more tourism payments and for those that the energy sector will claim if energy imports double. Many imported things will have prices in Argentina that they do not have in other parts of the world. The inflation of goods in dollars is going to be important, because since there is no other offer to replace them, whoever imports and has stock will take care of it. The import of cars in the first quarter was similar to that of 2004 or 2005, it is a reflection that there are no dollars.