It is not enough to avoid default to ensure elections
13:22
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Confirmed this week Alberto Fernández who does not want to be the president of the default. It was also clear that the smart decision of increase supply to creditors until reach agreement and avoid breaking the negotiation was a recommendation from Cristina Kirchner, as the Head of State himself confessed, data that was already circulating among the best-informed political journalists in the country.
Whether due to a dubious neo-capitalist conviction of the ruling couple or due to political necessity in the face of the ghost of an economic collapse that will take them off the field in the next elections,the government’s decision now opens two decisive questions for both the economy and politics in the immediate future and for the electoral year:
1) Do you reach withavoid default and reschedule private debt to avoid an inflationary shock in the next 12 to 18 months?
2) Even if the escalation of the dollar and prices is kept under control, is the Government in a position to rebuild confidence for to reactivate the economy in 2021?
3) Is it business now enter e invest in Argentina or do we have to keep going out?
It is certainly an auspicious event and to celebrate the political decision to agree with private creditors, give bondholders under Argentine law the same treatment that is recognized for securities under international law and, above all, as ratified Minister Martín Guzmán, look for a new understanding with the IMF to refinance maturities with that organism.
It should be noted, however, that what is being celebrated is not having descended on the table. It is important, without a doubt. But it is not to win the championship just in the middle of the table and down. The minister himself stressed this in his correct presentation of the agreement at a press conference. “Argentine economic problems do not end with this and we must continue working hard to normalize the situation.” He conveyed calm, did not go out to shout the goals to the opposing rostrum, did not make a single mention of the waterfall of criticism he received for the strange way in which he conducted the negotiation.
Too Alberto Fernández spoke about the future. Said The objectives will be to rebuild reserves, competitive dollars, fiscal balance and trade surplus. Markets and the economic world applaud the President standing up. They also ask how. To achieve those goals, the plan still does not appear.
Not a word of the public spending and the fiscal deficit. It is not clear whether the assumption saving The government is talking about, given that the payment of interest and principal on the debt has been kicked forward, it will be used to make life easier for companies and private workers when they come out of the crisis or it will serve to finance more spending and more state.
The path may be to lower taxes and have a greater margin of issuance of peso bonds to absorb smoothly the emission tsunami that follows the coronavirus; or the agreement can serve to stay the same and try to buy time until the 2021 elections, Betting on the issue by increasing the deficit with greater subsidies, and keeping the pressure cooker from inflation with freezing of rates, assistance plans, foreign exchange stocks and price controls.
The question of the exchange stock is central. A fact that politics knows and Guzmán should take into account: with an exchange clamp it is much more difficult to win the elections. The governments that arrived at the elections with stocks, in general lost at the ballot boxes.
The current exchange rate scheme is now the main stumbling block to fulfill the premises of the President of recover reserves and have a competitive dollar. Even if it were decided to maintain exchange control with a dollar for foreign trade and certain financial operations, what sense would it make to maintain the stocks and not allow a free dollar for savings and tourism.
The stocks – already useless – bring more problems than benefits. The use of credit cards for purchases abroad must be blocked; We must avoid promoting the sale of tickets and international tourist packages; imports must be stopped; and even to maintain, already without reasonable excuse, the semi-closed banks, without people being able to freely dispose of their money. All for nothing. More than 4 million people buy cheap dollars from the Central Bank.
Guzmán immediately lowered expectations for relevant announcements or news. “We are trying to manage the emergency,” He responds whenever asked about the future.
The reality is that it is not known when the quarantines end and how far the government is going to have to continue issuing for transportation subsidies, tariffs, ATP, IFE, provincial governments and the health system. Until now, the only thing concrete was the debt settlement and the tax moratorium. The rest, all stocks, controls, more deficits and the threat of more taxes.
The government’s political agenda helps less and less the economic tranquility that is trying to recover. Without institutions there are no investments. Repeats the attempt to colonize the Supreme Court and Justice naming militant judges and prosecutors through a reform of dubious legality that is already being appealed in Courts and rejected by the opposition and the majority of public opinion. Also, It seeks to criminalize the work of journalism to censor the critical press.
Like the Advances against Justice and independent journalism could be locked -as in the past- in Congress and in the Courts, a constitutional reform is now proposed that allows authoritarian populism and restricts current freedoms, individual guarantees and private property with the usual argument: that the State is better and not the market as regulator and distributor of wealth and equity.
While politics discusses philosophy and deals with its own problems with Justice, on the streets people defend themselves by shooting. Justice for people who pay taxes does not come. It is only reformed for the political aristocracy. Once again, the State is absent where society needs it, but very present where it bothers and disturbs.
ALSO
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