When this week the chamber that brings together US capital companies in the country, Amcham, cried out over “the very large commercial debt accumulated by companies since March 2022”, and the lack of authorizations to purchase dollars to the Central Bank to cancel it, many thought that it was simply a demonstration of force and pressure from the most concentrated sectors to be first in line to be served by the new government.
But the warning of the existence of the problem raised questions about what lies beyond these large transnational companies. And the answer is alarming. Hundreds of Argentine companies have been unable to pay their input suppliers from abroad for five months (since July), their credit was cut off and they are already beginning to suffer the consequences of the lack of key material to produce (which they stopped sending).
Furthermore, the only card they had left to hope for at least a partial response in the immediate future has just fallen out of their hands. “The agreement to expand the swap with China that (Sergio) Massa announced a couple of months ago, of 6 billion dollars, is down,” a senior official of the outgoing government confessed in a low voice. The only credit window that was still open was thus closed.
Driving away the yuan
The information that arrived from Beijing a few days ago – just a few hours after the final result of the presidential elections was known – was lapidary. “The Chinese government does not want to know anything about special agreements with Javier Milei, they know what their position is with respect to the government of China, they already know what Argentina’s position will be in relation to the invitation to participate in the BRICS and they assume that its international alignment will be , while it lasts, always opposed to China”.
Therefore, agreements such as the extension of the swap and other financial support that were discussed with the Argentine authorities (Alberto Fernández and Sergio Massa) were deactivated. Even the future of the southern hydroelectric dams (on the Santa Cruz River), financed entirely by China, now remains under a big question mark.
Returning to the issue of imported inputs for the national industry, the shortage of foreign currency was increasingly restricting the authorization to purchase dollars in the wholesale market. In a situation that was dragged down by the loss of reserves year after year from the Macri administration to date, this year’s drought buried any possibility of recovery.
The Massa management expected to be able to find a way out from March 2024 onwards, with the liquidation of the new harvest. And meanwhile, be able to count on foreign credit mainly from China that would allow the situation to be mitigated, but without being able to “catch up” with all the importers with approved external purchases. The vote in the runoff closed those expectations.
Until now, payments abroad for imports have only been authorized for sectors considered critical, such as medicines or supplies for the extraction activity in Vaca Muerta. “And very little else,” concludes an industrial source, a business leader of those who feel the burning of the noose around their neck.
“There are thousands of companies that are blocked, because they are the ones that need a certain input, that does not have a local alternative, which cannot be dispensed with. It happens in hundreds of products, some, like in my case, the industrial company itself imports the input, others obtain it through a distributor or intermediary importer. But it is the same, no one is being able to pay anything and the process is slowing down because they do not give us more credit. There are thousands of companies that are blocked in their production process,” explained at length.
The inflationary shock
What is going to happen to these national industries, mostly medium-sized? They admit that, until now, contact with the new authorities to be assumed was impossible. “We do not know what they plan to do with the debts of importers. Because if the Central Bank does not have dollars and the wholesale market continues with the current rules, we do not even have the legal alternative of leaving the official dollar. And if they enable the purchase of dollars through the financial market, how much is the cash price going to cost if they send all of us importers to buy from the financial market?”
In the midst of desperation, businessmen speculate with different hypotheses. “This situation of blockade, of not being able to pay or import, is worse than that of a megadevaluation,” one of the businessmen consulted risks, boldly indeed. But, quickly and sooner than the writer of this imagined, the other respondents agreed.
“The only thing we don’t want is for some sectors to be privileged by accessing an official dollar, suppose they put it between 600 and 650 pesos as Guillermo Francos said, but they leave the rest of us out. Because, in that way, they eliminate us,” one of the interlocutors confesses, repeating from time to time, like a litany, that “in a few days, my destiny as a businessman is at stake.”
What happens if they are allowed to buy in the CCL to pay off their debts? “Suppose the dollar shoots up in the CCL to 1,500 pesos due to greater demand. I already know that it is not that all my costs move through the CCL, but an increase like this, of 200 percent or more in the cost of my input Mainly, in my case it can represent a 50 percent increase in my overall cost. I have no choice but to transfer it to the price, but I don’t know what happens to my sales, it’s impossible to project it.”
The person responding is in an intermediate link in an industrial chain of a mass consumption product. And in one of the basic areas.
What everyone agrees on is that transferring the demand for foreign currency to import to the financial market would be equivalent to an inflationary shock of large proportions.
With the brake on
And what to do in the meantime? If on Monday, Tuesday and during these days they do not offer you an exit. “Production is already stopping (says one of the interviewees, emphasizing the “now”). Because there are those who do not have an input and cannot produce. So they sent people on early vacations, they downsize and produce other things but leave aside the item linked to imports. Others are gradually reducing production, to extend the life of the stock of the critical item, waiting for it to be resolved. And others, and I believe there are many, are selling the minimum necessary to sustain the company in For example, I know some who had stopped but now they are going to try to sell something to have cash and be able to pay their staff for the end of year holidays.
“In addition,” adds a third party, “no one knows the cost of what they are producing, because when they replace raw materials there they have to pay three or five times more than the previous item cost. Today when it is sold, we know “That, most likely, you are selling at a loss. If you do it and you are exhausting the imported input, it is because you are desperate, because you are reliably doing it at a loss,” says what could be the final sentence of this report.
“One more question. In the immediate future, what would be your biggest concern?” this newspaper asked. “It is my concern and it is what I am most afraid of: not being able to pay salaries and bonuses at the end of the month,” responds one of those invited to share this reflection. Nobody contradicted him.
2023-12-10 05:56:08
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