Argentina returns to pull the thread of heterodoxy in its economic labyrinth

Buenos Aires



The labyrinth, economic and financial of Argentina, desperately seeks a path to the exit door. The one in charge of plotting it – or discovering it – is the heterodox Martin Guzman. Joseph Stiglitz Ward and brand new Minister of Economy, this 37-year-old economist unveiled, in very general terms, a "plan" that lacks details but – and is not a minor fact – seeks the umbrella of the Monetary Fund International (IMF).

But Guzman also reassured the "Kirchner national" by ensuring that the project "is ours." Simultaneously, he sent a reassuring message to the markets by saying that "the IMF is going to be part of this."

The debt or the “virtual default” (cessation of payments) returns to the third economy of Latin America in a dramatic situation. The government of Alberto Fernandez declared a triple "emergency" (economic, health and social) for the "situation of extreme weakness" that plagues the country. The new rules are still unknown ("we are disembarking" they say at the government house) but the businessmen, with a sense of smell from the known experience, intuit the return of the double compensation figure (increase the cost of unfair dismissals), more price controls and new tax charges.

Advance Adjustments

In his inauguration speech Alberto Fernández asked for «solidarity» and everyone understood the message. In fact, those who "stoked" chose to make the adjustment in their companies before December 10 to reduce layoffs. "Withholdings," pre-export taxes, also fly overhead. Matías Kulfas, Minister of Development, pointed in that direction before warning that "all economic policy must be aligned".

For the first time in history, Peronism is not the one who delivers a time bomb as an inheritance, but the one who receives it, and must renegotiate a debt of almost 100 percent of GDP.

Alejandro Bulgheroni, president of Pan American Energy Group and one of the most important businessmen of Argentina recognized these days in Infobae that "the main problem of Argentina is that nobody believes us". That opinion is shared by the markets and the Argentines themselves. Both those who voted the return of Kirchnerism with Alberto and Cristina Fernández on top of power, as those who wanted to give Mauricio Macri a second chance. Some and others distrust and proof of this is that, as always, they turn to the dollar, subject, practically, to the same restrictions of purchase sale or "stocks" of four years ago. And, as then, with an official value and another one in the black or "blue" market (something more than 5% difference).

Alberto Fernández's statement assuring that "Argentina has the will to pay but does not have the resources to do so" is an overwhelming reality. The problem, now, is how to renegotiate with international organizations and private bondholders so as not to go from "virtual default" as the President of the Government and his Minister of Economy baptized it, to pure and hard "default". The "Guzman plan" or the emergency program, of which the details are unknown, points to an extension of capital maturities and interest for two years with the IMF. The idea is to let that time pass and once Argentina has grown, honor the payments again. "The approach is meaningless and can hardly be accepted by the Fund," he observes. Roberto Cachanosky, director of «Why are you going to grow up? How are you going to do it? Or, in the best case, «What is the guarantee you can give me that you will be able to keep your word?», He reflects.

The questions are not clear and the theory is based on an assumption that finds no solid basis for support. Something similar to what happened to Mauricio Macri when he announced "a rain of investments" that never came. The former Argentine president was able to access an unprecedented loan of 57,000 million dollars, despite putting a fragile program on the table but, recalls Kachanosky, "he had the support of the international community and Washington." This scenario is not precisely the one that accompanies the Argentina of the two «Fernández» (Alberto and Cristina). Distrust elevated to the cube is the term that best reflects things.

It is still unclear who will have the last word in that political couple of convenience that today has the power. In fact, betting to take the reins of the country for that "brilliant mind" as Stiglitz described Guzman was more an imposition of the widow of Nestor Kirchner, and not an initiative of the president who, "always thought of William Nielsen," notes a Surrounding man.

Nielsen, with real specific weight and concrete experience in renegotiation of Argentine debt, during the stage of former Minister Roberto Lavagna, was vetoed by Cristina Kirchner and had to settle for the presidency of YPF (Fiscal Oilfields) as a consolation prize. His best treasure is Dead Cow, a 30,000 square km gas and oil field but for its exploitation, complex because of the type of drilling for “fracking”, you will need investments and without guaranteed legal certainty it will be more than difficult to achieve them.

Kicillof's shadow

The intervention and subsequent expropriation of YPF to Repsol is remembered these days after hearing the speech of assumption of Axel Kicillof as governor of Buenos Aires, a territory that is equivalent in size to that of Italy. The former minister and executing arm of that outrage that would later cost Argentina billions of dollars in compensation, announced that will repeal the increase in public service rates planned for January. «There is no room to delay fees. We hope that the national government does not make the same mistake as Kicillof », warns Daniel Artana, chief economist of the prestigious consultant, FIEL (Latin American Economic Research Foundation).

Kachanosky believes that Argentina could only have light at the end of a tunnel if it "presents a credible, solid and rigorous plan to the IMF." With the agreement of the main financial organization on the planet, «then, I would be in a position to agree with the bondholders. They will not accept any restructuring if there is no agreement with the Fund before, ”he adds. The idea of ​​Martín Guzmán would be to arrive in March with a closed agreement. Meanwhile, inflation, around 52%, will continue to be his workhorse. The "objective is to lower it to a digit" but "it will take time," Guzman acknowledged. The important thing, warns Daniel Artana, is that "he rejected his fight by means of the monetary emission party."

Argentine tangle complex. Facundo Gómez Minujín, president of JP Morgan in Argentina, summarizes in a devastating phrase the current scenario: «In Argentina, both the rich and the poor are getting poorer».

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