“Good financial indicators” do not anticipate “a better economic situation in the future,” LLA deputy Jose Luis Espart suggested in a tweet this week after a private meeting with the nation's president. From other approaches, instead, they point out that financial happiness is a reflection of the increasingly marked distance between the level of activity in the real economy and the results obtained in stock market businesses or the exchange market. Divorce is not new, but it must be reconsidered to avoid making a decision that, due to haste, will inevitably turn out to be a mistake.
Javier Millay's government has set the most urgent objective of achieving economic balance, resigned to the need to respond to the contraction of the growing economy, the decline in income of the population, and the unemployment that emerges as a result of the current situation. And, of course, the rate of increase in inequality leads to markedly higher levels of poverty and marginalization.
Now the question is: Are you reaching that goal? On the financial end side, the surplus results of the financial accounts for January and February inevitably require repayment of some expenditure at some point (transfers to provinces, loans to lenders for electricity supply), and the actual fall in civil servants' salaries and retirees' salaries is far behind price increases. That is, the liquefaction of the salary celebrated by Millie. Can these financial “savings” mechanisms be sustained over time?
On the currency side, the continued accumulation of dollars by the central bank (more than eleven billion bought in the official exchange market since Milei took office) points to a positive outcome. However, as of December 31 prepared by Indec, “External debt of non-financial corporations” in the last quarter of 2023 shows a significant increase in the order of $4,737 million. External debt, which is essentially private, is estimated to have its origin in unpaid imports during the period.
In this case, it cannot be ruled out that this number has grown arithmetically in January and February of this year, not only has the drought of foreign currency extended to importers, but at a certain time and not less than sixty. Days, the current government has zeroed in on the outflow of dollars from the central bank to service private debt abroad.
The foreign exchange surplus shown by the government is a semi-positive result because it is generated by not paying off current liabilities arising from commercial exchange. At some point you have to pay.
In this regard, the financial analyst and analyst Alejandro López Mieres recalled, “The central bank has more than 9,000 million dollars in its liabilities, which corresponds to the boprial subscribed by importers with commercial credit abroad.” The instrument, recalled the Ipypp (Thought and Public Policy Institute) researcher, was not created exclusively to cancel importers' debts, but as a coverage mechanism that allowed commercial debtors to purchase (a form of exchange insurance) – against payment in pesos – a bond issued by the central bank that would be paid in dollars at maturity. Or apply in advance in pesos but at the dollar value at that time.
Meanwhile, it is a loan in dollars in exchange for BCRA not providing importers who want to buy foreign currency from its reserves. Thus, the central bank creates a foreign currency surplus immediately, but borrows in dollars in the future and in the distant future. The conclusion is that under these conditions, this second surplus, the exchange rate, is also not stable.
Official strategy and financial business
This week, Roberto Felletti, former deputy minister of the economy and former head of the Budget and Finance Committee of the Lower House, published a tweet he offered under the title “Caputo, the hero of finance capital”. It refers to the minister's “habit” of creating “disproportionate financial benefits” with his economic management, both under Mauricio Macri's previous government and in the current one.
For now, Feletti points to another data arising from the same report on Indec's International Accounts, according to which “residents abroad reduced their portfolios of dollar-denominated bonds at the end of 2023 in the previous quarter”. Had they decided to switch to bonds denominated in pesos, adjusted by the CER coefficient (based on the inflation rate), they would have had a “40% return in dollars” within three months.
This could have happened if foreign residents bought Boncer 2026, which “rose 56.9% between January 1 and March 25, while the dollar appreciated 10.9 percent,” Felletti reviewed. . Such a well-timed financial maneuver would have given the investor 41.5 percent profit in dollars within three months.
“If they bought bonds with CER to take advantage of the dollar's excess profits, did they not trust the government that it was going to dollarize and reduce inflation? Or was it because they got concessions on the path of economic policy?” Felletti asks in his tweet, which no doubt “if financial capital ever creates its own hall of heroes, Minister Caputo will be prominently featured there.”
Lopez Myers, consulted in this newspaper, shares Feletti's observation and affirms that this period of the Milei-Caputo administration has made it possible to create operations with enormous profits in dollars. “The financial sector is having a party, but the real economy is headed for destruction, which is nothing new,” he warned. But he made one more point.
“Decreasing interest rates along with a stable dollar is a trigger mechanism for capital to flow toward inflation-adjusted Treasury bonds, such as bonds, as well as liquefying money reserves.” Indexed bonds are attractive as long as the expectation of inflation is higher than the rate offered by banks in a given period and higher than the expectation of deflation. “This is how the government affirms its main macroeconomic policy argument: not to issue the Treasury and to finance, if necessary, through the market,” adds López Myers.
But, according to the analyst, “Milei is giving some more signals about the path of his economic and monetary policy. He is no longer talking about dollarization, but about currency competition. What is this? I explain that he is firmly committed to zero emissions. , but it is not only financing the treasury but monetary It also nullifies the endogenous economy created by the liabilities. The only output is to buy dollars, that is, the only means of paying money into the economy is when they sell. Dollars to the central bank. Similarly, the sale of dollars by the central bank will be a means of withdrawing pesos from the economy,” he said. justified.
“So, if the monetization mechanism is only by buying dollars from the central, it's convertible. It's a new convertible, maybe instead of a fixed exchange rate, which is different at the time, now. There can be a certain dirty float, a dollar will fluctuate but not so freely. No,” Lopez Myers concluded. For now, the stock won't be raised “as it works to achieve that objective,” and some restrictions on that future plan may even be maintained.
However, it is important to consider that the immediate outlook is not very favorable for the government to achieve its objective. The unsustainability of “twin surpluses” and inflation still difficult for the government to control, despite widespread recession working to support that objective, Miley has not cleared the path to achieving the new transition she dreamed of.
In terms of economic and social perspectives, this official proposal does not point towards a V-shaped path (after the current recession, recovery at the bottom and the beginning of sustained growth), but towards a deepening of the crisis and stagnation after conditions with significant social inequality, an economy with a reduced number of enterprises and high concentration (l -shape path).
This is indicated by the experience of the adaptable model in the country and various studies carried out in this regard. The expected outcome of these programs is greater external dependence, greater economic power, cheaper wages, greater poverty and marginalization. This can be interpreted as the model sought by Milli, the question is whether economic and social reality will put a brake on his path.
