Perhaps it is from the debate of Resolution 125 of July 2008, that we Argentines did not look at a legislative definition with such intensity. The truth is that, finally, the The Government managed to approve the Bases law through the tiebreaker of Vice President Victoria Villarruel, just as it happened on that occasion with Julio Cobos. But this was not the only achievement of the week achieved by the Government: it also It was able to renew a section of the currency swap with China, it passed the -8th review of the agreement with the IMF, which allowed it to release some US$800 million, and the May CPI was better than expected.
Thus, this week, the Senate generally approved the Bases law and the fiscal package. In the particular vote, only, they were rejected the chapters of Income Tax, Personal Assets and Social Monotribute. What follows now is the return of the projects to the Chamber of Deputies. There, the changes of the Senate and the deputies must be validated They will have the possibility of reincorporating the original versions of the chapters rejected by the Senate. All in all, we can conclude that the victory of the ruling party was clear.
Good news for President Javier Milei also came from the IMF. He technical team of the entity and the Argentine authorities reached an agreement on the eighth program review. Thus about US$800 million were released and the organization stated that “The program remains firmly on track, with all quantitative performance criteria having been met by the end of March 2024.””.
The Government’s good week concluded with the CPI data, lower than expected. In May, inflation stood at 4.2% monthly, the lowest since January 2022. And finally, it is important to mention the renewal of the swap with China. After several back and forths, an agreement was reached and the BCRA will not have to disburse the US$5 billion (35 billion yuan) of reserves, which means a great relief for the national coffers. Despite this important news, challenges still remain.
Second semester: what are the economic challenges that the gurus see
This week the Minister of Economy, Luis Caputo, said that the era of negative real rateswhich was part of the liquefaction strategy to reduce the remunerated liabilities of the Central Bank, It ended. This was after the Treasury Bills tender that he validated a minimum rate of 4.25% for 90 daysand that worked as a signal for the market.
In this regard, since GMA, They said: “Although the message is powerful, in our opinion it would be a hasty statement. Firstly, it is not yet possible to consider the Lecaps cut-off rate as the reference rate. The fact is that, by imposing maximum emission amounts, The pesos that were left out of the auction put upward pressure on the price of the bill, reducing its yield. “This dynamic was seen after each Mecon tender.”
In short, they ventured from this report that “for the Treasury to determine a rate that is the center of gravity of the system, Caputo’s team should be willing to take all the pesos offered at that cost. In addition, regulations on banks are still in force, which does not allow deposits to be invested entirely in Treasury securities and, therefore, they can use the rate as a benchmark.”
MegaQM, for its part, He stressed that “a key piece of information would be that in the next Lecaps tender there are no maximum amounts. If so, we could already enter the final stage of rescue of paid liabilities. This is two weeks away. Once this rescue is concluded, everything indicates that a proposal could come to mitigate the issuance risk implicit in the puts that banks have on the CER debt. “This is $17 billion that, from the official perspective, can generate noise in a process of opening exchange controls.”
For IEB Group, What happens with the fiscal package in Deputies and its impact on the fiscal balance will be key. According to data from the Congressional Budget Office, the Ministry of Economy, and its own estimates, Treasury revenues could benefit by 0.5% of GDP thanks to the fiscal package. However, they expressed that “if the rejection of the titles referring to Profits and Personal Assets is ratified, the bulk of said improvement would be lost. This situation is aggravated when taking into account that the Minister of Economy assured that, if the laws are approved, the PAIS Tax rate would be reduced from the current 17.5% to 7.5%.“.
A report of Facimex maintained that The favorable resolution in the Senate opens a new stage for the economic program, where the priority is exchange rate unification. “The economic program needs a compression of the country risk below 800bps to refinance market debt maturities in foreign currency next year, which would imply converging towards the yields of our comparables. The key to achieving them is to remove exchange controls“, they closed.
Lastly, for LCG, Another obstacle also arises, because “If the economy were to begin to recover, the tensions on the exchange front would be greater.and the disinflationary dynamic will be louder than we have had these first months of the year, which will also lead to greater economic and political uncertainty.”
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