The urgency and harshness with which the Minister of Economy, Luis Caputo, went out a few days ago to cross those who They question their policies, They left the feeling in the markets that something is not working well with Javier Milei’s plan.
Caputo charged against the economists who don’t understand their policiessaid that the IMF report was outdated and incidentally sent a shot at journalism, which he accused of inventing problems because he and his team do not usually provide information.
The official used an unusually harsh tone to come to the crossroads of criticismmore in line with the emphasis that Milei places on his statements, rather than his usual tone of serenity to explain his policies.
The Minister of Economy is aware that Investors and investment banks are questioning some of its policies, especially the exchange delay. Added to this is the conviction that it will take longer than expected to recovery of the economy. The drop in Gross Product of 5.1% in the first quarter of the year reflects that economic activity shows no signs of recovery, with a sharp drop in consumption and a loss of jobs that are already around 150 thousand positions in the first semester.
Dollar: Did Luis Caputo fall in love with the crawling peg at 2%?
One of the critics What investment banks and analysts usually do is to economists who end up falling in love with their creation. In the case of Caputo, specifically The questions seem directed towards the fixed rate of peso depreciation of 2% monthlywhen inflation was well above that level.
A similar criticism was received Sunday Cavallo in the mid-90s, when international organizations began to warn that there was a exchange delay that ended up imploding when Brazil devalued its currency and Argentina lost enormous competitiveness in the markets.
In the market they point out that Luis Caputo “fell in love” with the crawling peg at 2% per month
Some similar questions, bridging the gap, are now beginning to appear in the world of finance.
Thus, Argentina went from celebrating the approval in the Senate of the Bases Lawthe disbursement of the IMFthe low data inflation of May (4.2%) and the renewal of the swap with China, despite the questions that come from Wall Street.
A report from the investment bank Barclays He warned that the path to recover markets and strengthen reserves is being demonstrated gradually. Furthermore, he warned thatImport payments are just becoming normalthe Treasury has accumulated additional short-term debt and the exchange rate has appreciated with the exchange gap widening (40%/45%) when exports are seasonally higher.”
The blue dollar at $1,330, a record level, adds more noise among markets always afraid that Argentina will end up giving them another headache.
The main objection is that The Government fails to reach consensus on fiscal adjustmentwhich leads the Milei-Caputo duo to depend too much on cost cutting.
What about currency settlement
The rhythm of peso depreciation began to be at the center of the critics from the decision of agricultural producers to slow down the pace of sales of their production, which is easy to notice if you travel along the Buenos Aires and Pampas routes, where A sea of silobags is observed, most of them with soybeans.
This resulted in the central bank has slowed down the pace of purchase of foreign currencyThe monetary authority is facing increasing difficulties in rebuilding its reserves. Throughout June it was practically unable to buy foreign currency.
However, the projected export volume of the main agricultural complexes grows in 2024 by 58% compared to 2023 and 6% compared to the average of the last three years, reaching 89.4 million tons. But average price of agroindustrial exports lost 19% compared to 2023 and 16% compared to the average of the last three years.
If the foreign exchange settlement regime is maintained “dollar blend” (80% to the MULC and 20% to the CCL) for the entire year, the Rosario Stock Exchange estimated for 2024 a liquidation of foreign currency by the agriculture of US$26,882 million dollars. It would be 51% above the previous year (US$17,833 million), but 11% below the average of the last three years (US$30,372 million).
What the IMF thinks of Caputo’s program
Although Caputo tried to relativize the criticism of his program that was filtered in the extensive document of the Monetary Fundit became clear that The organization is not comfortable with some of the policies that are being applied.
For the Fund’s economists, a new devaluation seems to be necessarywhich will definitively pave the way towards the elimination of the PAIS tax and lift the exchange rate.
The IMF is always in favor of lfree floating exchange rate, because he believes that from there the rest of the variables of the economy become clear.
The rise of the blue dollar, which exceeded $1,300, adds more noise to the markets
Everything indicates that until there is a clear outlook on the release of the stocks, It will be difficult for the Fund to open the wallet againespecially when the United States must define in November who will be the president of the country for the next four years.
Let him first devalue, eliminate the PAIS tax, lift the stocks and draw up a clear monetary policy, and then talk about fresh funds. This Sunday the economic team analyzed the possibility of obtaining extra funds from the World Bank, but it seems difficult for that entity to activate a significant disbursement to Argentina without the approval of the Fund.
It is also not clear whether the coin competition The one Milei talks about has the same components as the one imagined by the IMF technicians, closer to the system that prevails in Peru and Uruguaymanaged flotation.
He Fund also calls for accelerating the removal of subsidies and raising ratesand has expectations that Deputies can insist on the restitution of the Income Tax for some 800 thousand employees.
The criticism of Caputo and their plan are varied and come from different sectors. The best defense that the Minister of Economy could put forward is to confirm that the economy reached his level and that the second semester will mark a recoveryeven if it is slight.
Otherwise, the criticism will become increasingly acidic and, as is well known in Argentina, it is difficult to carry out an economic policy in turbulent scenarios, if questions are renewed daily from different sides of the scenario of dispute over the power.
