The bonds with parities of more than 60 percent, the country risk flirting with dropping below 1000 points, stocks with shocking increases and the dollar almost without movement 4 months ago. The economic team assures that all this shows the success of the Economic politics and that the next step is to hold the rate of monthly inflation in single digits.
Some consultants are more enthusiastic than necessary in their statements and suggest that it would not be crazy to think that the financial dollar ends up at levels below the official one or that the current quote of 1000 pesos can last at least until the end of this year. An ode is made to the fiscal and monetary adjustment of recent months, overshadowing any critical view.
The story of economic policy turns over and over again on the same point: the markets reacted positively (with increases in bonds and stocks and a decrease in exchange rate pressure) because They anticipate the future. What would come forward is a cycle of strong rebound, investments and economic growth.
This reading seems to have an important disconnection with reality. It is not necessary to have walked the New York or London stock exchanges to realize that investors have irrational behavior, that there is a political factor in the purchase of assets and that it is a blunder to consider the movement of a stock market asset to visualize the future.
A simple way to see it is with the history of a particular stock, for example, that of YPF. Although the story is well known, it is worth repeating over and over again because it perfectly shows the market irrationality and that his mood swings occur in the blink of an eye.
The oil company came from significant price falls (mainly motivated by the political palate of investment funds) and at the beginning of the pandemic there was a large international bank that directly declared it bankrupt. He published it in his client reports and stated that the YPF share price outlook was $1. Not only did it not touch that price, but it began to rise until reaching the current $21.
The example serves to think about the current situation of the Argentine financial market. Stocks and bonds rise, country risk falls, the dollar remains still and analysts assure that everything is going to take off, including the activity of the real economy. But this optimism that has blossomed in recent months It can evaporate from one day to the next. And those who predicted that the country was going to have a fantastic rebound found themselves with a sidereal crisis.
The central point is that there is no natural law that guarantees that a disproportionate adjustment to the public sector (and monetary policy) allows the economy to organize itself, take off, and resolve the discomfort of millions of people. On the contrary, cutback programs end up causing more suffering and confusion in the population, with real incomes on the floor and a cataract of new concerns such as unemployment.
This situation sooner rather than later ends up generating the society’s rejection of adjustment policies and remembering times when transportation and public services were not luxury goods. The change in the population is one of the elements that could transform the mood of investors, but it is not the only reason why optimism can be altered.
The results that the government shows as great macroeconomic successes hide strong inconsistencies. At the monetary and exchange level, the yields on public debt and international reserves, the most obvious attempts to do creative accounting appear.
For example, in the latter the government claims that it was able to recover billions of dollars from net reserves since last December. However, much of this recovery was the flip side of stepping on payments for new imports and issuing Bopreal bonds.
In the 1816 consultancy they showed it with hard data. It was calculated that between the devaluation of December and the end of February (latest data closed), there were 9.5 billion dollars of imports that were not paid.
“Extrapolating these figures, we assume that all the currencies that the Central Bank bought in the exchange market in the Milei era (about 14 billion dollars) can be explained by new debts from importers“said the consulting firm’s document.
With these accounts, the report draws a conclusion with a clear warning tone: “if the importers’ debt was a restriction to release exchange controls when Milei arrived, it remains so: that debt is greater today than at the time of the President’s inauguration”. This is one more example that could make investors recalibrate their optimism.
