The market is looking for key definitions regarding FIXED TERM and DOLLAR

The latest report to clients of the Capital Foundation, by Martín Redrado, looks challenging for the Government: the Current recession is the worst since the 2001 crisisnot taking into account the sudden collapse in 2020, due to the pandemic.

The projected decline in the economy for 2024 will be close to 4%, according to the latest survey by the Central Bank, but if the exceptional performance of the countryside after last year’s drought is excluded, the collapse will be approximately 6.6%.

The first data on the real economy for June show a marked recession which is resisting finding a foundation on which to stand in order to begin recovery.

The car production and cement offices, as well as the sales in major supermarket chains during the past month, they do not point to no improvementRather, they reflect a recessionary cycle that remains in a deep well.

The data is not minor: the report by Redrado and Carlos Pérez highlights that, in each of the crises that hit Argentina from 2001 until now, the time required for recovery (up to the initial point, before the explosion of the crisis) was 18 months on average.

In the best case scenario, then, Argentina could only return to point 0 around May-June 2025. If everything goes well, of course.

Javier Milei is angry with those who want to impose the pace of economic policy on him

Federico Sturzenegger’s next steps

Emiliano Anselmi, chief economist at Portfolio Personal Inversiones (PPI), says that the Government, now with the arrival of Federico Sturzenegger, will have to give new signals to the market to avoid further tensions in the exchange market. And I would have to do it soon.

Anselmi refers to a specific measure: a increase in reference interest rateswhich removes volatility from the gap.

The difference between the official dollar and the financial markets’ quotes climbed to 50% last week, a level inconsistent with an economic recovery.

That is why the financial market is saying that the CCL and MEP’s value of $1,400 is too high a floor to sustain itself there, at that level.

Anselmi, in dialogue with iProfessionalassures that The gap “can be stabilized around 40%“as long as the Government raises the reference rate. “It is the bearable limit for lift the clamp“, concludes the analyst.

Until when will Javier Milei continue with the cepo?

Javier Milei is angry with those who want to impose the pace of economic policy on him. He showed this in public when he mocked Carlos Melconián and denigrated Ricardo López Murphy.

The market assumes that the lifting of restrictions on the cepo will be at some point in the last quarter of the year.

Also when asked about the IMF attitudewho bowed to the critical voices a couple of weeks ago. Or Domingo Cavallo himself, who on his personal blog often points out the recipe for a hypothetical way out of the crisis.

The President wants to dictate the next major measures with his own pulse. He believes that the next steps are tied to his political leadership. That is why he relaunched the “May Pact” version of July 9.

In the market they assume that the Lifting of the restrictions of the cepo It will be sometime in the last quarter of the year. Anselmi gives two reasons for this possibility:

  • A political necessity. “Doing it later, already in 2025, clashes with the electoral calendar. The Government will not take that step a few months before the legislative elections,” the analyst told iProfessional.
  • An agreement with the IMF. In theory, the government will take the next few months to negotiate a new agreement with the Fund that will allow it to strengthen its reserves and, on the other hand, launch a long-term stabilization plan, which of course includes the release of the exchange rate restrictions.

In any case, one of the doubts has to do with the real exchange rate that will be achieved from that moment on.

If is one cheap dollarthen this plan will not have much credibility. It is known that in Argentina, a cheap dollar means scarce reserves and the embryo of a next crisis.

Now the Government has an alert for the rise in food prices

Price tension

After celebrating for several weeks with a inflation close to 0%now the Government has an alert for the rise in food prices. It happens after the exchange rate tension, which at some point brought the blue dollar and the financial ones above the $1.400and the gap clearly exceeded 50%.

The alarm was raised in the last few hours by the consulting firm LCG, which monitors the evolution of prices week after week.

The latest report, released in the last few hours, showed inflation of 1.8% in the last week.

It was the worst monthly start since last March, when the First week inflation climbed to 3.6%Since then, for three consecutive months, inflation has been falling.

In April, the first week was 0.4%; in May, 1.0%; and in June it was 0%. Now, at the beginning of July, the following happened: Food inflation climbed to 1.8%.

In the Market Expectations Survey (REM) just published by the BCRA, the 40 economists consulted projected inflation of 5.2% for June. And 4.8% for this month that has just begun.

 
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