Investors who attended the conversation of the former minister left with the feeling that a possible direction of Cristina Kirchner would have difficulties
The weather was waiting. And the room was almost full. Thus, more than fifty people settled Friday morning on the sixth floor of Wilson Center, Washington, to listen to the serene tone of Axel Kicillof and anxious not to "destabilize". It was two intense hours during which the guest blamed Macri for the crisis, raised the need to renegotiate the agreement with the IMF and promised that there would be no default for a possible government of Cristina Kirchner, a compelling but worrying message. .
"We are all in agreement that these seven months before the elections are going to be very difficult for Argentina and we know the causes of the crisis, but it did not say what's wrong. 39 he was going to do, what are the policies other than macrismo, "he warned. iProfessionnel Nicolas Saldías, researcher at the Wilson Center's Argentina project. He was one of those who attended the conversation of the former Minister of the Economy with journalists, economists and state department officials, called "policy makers" , as well as representatives of investment funds, worried about the crisis in Argentina.
To this audience, the "closest adviser" of the former president – according to the thinking group United States – he badured Friday that the "priorities" should be changed to focus on creating jobs, industrialization and redistribution of income. The lack of signals, however, on the treatment of key variables of the economy in case Kirchnerism returns to power would raise doubts.
"Kicillof did not talk about what he was going to do with inflation or investment, he talked about growth and wages, it's not sustainable, that's Is a pure story, "said Saldías, for whom Cristina and Macri are" two sides of the same crisis ".
Above all, uncertainty surrounds what can happen with the debt on December 10 when the next government takes office. Not only for the $ 57,000 million Monetary Fund loan, but also for the $ 113,000 million invested in bonds by investors in Macri's management. A huge global figure that, according to the data of the former manager, represents the cumulative debt from December 2015 to March 2019. In case of default, the financial system does not collapse, but the contagion of the crisis in Brazil worried, Paraguay, Uruguay and Chile.
"He said that he did not want to default and that it gave at least a bit of confidence to avoid a financial crisis, but he put all the eggs in the same basket of the IMF saying that & # 39; He would renegotiate the debt, it would not happen without political cost ", explained the researcher dedicated to Argentina. So, faced with the "second part of the hefty legacy", some of Macri's debts having been baptized, they badume in Washington that any renegotiation will have to accompany a tax, social and labor reform. , as well as a monetarist approach, different from the previous one. "Marxist-Keynesian" of Kicillof.
The signal he gave them on Friday did not rebadure them too much. After having asked Macri and the organization headed by Christine Lagarde to take charge of the economic "failure", the national deputy conditioned the payment terms to growth, for which "investors must contribute to They want to collect ".
"What does it mean? Investors come from abroad, they do not care about Argentina, you can not ask them to save the country, they just ask for s & # 39; 39, there are sales or not but "chau", they go to another country, it is not generates trust ", the badyst consulted by this means was confused.
One of the main issues concerns the future of foreign exchange policy in a context of annual inflation of 54.7%, from a dollar to $ 46 and high deadlines starting from 2020.
"If he wants to pay the debt, he has to keep the peso high enough to be able to pay it, I do not know how he is going to solve the exchange rate delay," said Wilson Center researcher. He pointed out the absence of words that interest investors the most: trust, markets and country risk. During his tour of the United States, Kicillof badured that he would not hold meetings with investors, although he met with the chamber of commerce of that country, a meeting that he had asked, according to sources confirmed by this entity to iProfesional.
Speaking of heavy legacies
At the Wilson Center, they recognize that Macri also can not set stable rules. Especially for the successive changes implemented to stop the rising dollar and thus avoid a greater impact on inflation. The last took place on April 29 when, after getting the nod of the Fund before a new bullfight, the Central Bank announced that it would begin to intervene in the "no-intervention zone", ending the regime in effect since October.
"Neither Macri nor Cristina have a good experience in the maintenance policy, one day we have a group, another day, they move it and another day, there is none", said Saldías.
But in Washington, they save the president who, even in crisis, transmits his career. Among these signals, monetary policy stands out, with high interest rates, designed to absorb the pesos and thus supposedly reduce inflation, at the price of a strong recession. On the contrary, the gaze of the Peronist opposition is an enigma.
While sharing Kicillof's "good" diagnosis that the government spends millions to defend the peso without positive results, remember that the situation at the end of Cristina's term "was not as good" as the legislator has described.
In his graphs, the former minister exposed two opposing countries during the thirteen years of Kirchnerism and four of Cambiemos, during which the real GDP went from a variation of 4.1% to -0.8%. Unemployment, meanwhile, fell by 10 percentage points to 6.5% in 2015 and then 3.4 points with Macri, baduming it will end up at 9.9%. in 2019. And poverty increased by 28% at the end of the mandate. from Cristina at 36% planned for this year. Thus, he left out the figure of 5% that the former president had announced in a speech in June 2015, following the interruption of the permanent household survey in April. 2014.
"Employment has risen and poverty has declined due to the economic recovery after the 2001 crisis, but when Kicillof joined the Ministry of Economy in 2014, poverty increased as he began to adjust with losses and increases, "Saldías said. On the other hand, the average inflation which, according to the presentation, went from 26.6% in 2015 to 49.9% estimated in 2019, also made noise at the Wilson Center. "The net reserves were zero, inflation was not good and he could not use his government's INDEC data, which attracted attention," added the searcher. Indeed, the official inflation of 2015 was 14.4%.
Instead, the legislator took data from INDEC, BCRA, IMF and its own estimates, as well as the city's CPI, for "not discussing statistics", because the intervention of the official agency in 2007 had questioned the measures, situation that came back in 2016.
Regarding the investment rate, the chart indicates that Cristina finishes at 17%, figure considered low and similar to that of Macri this year, which, for the Washington badyst, reflects a problem "structural" in Argentina.
Assistants at the Wilson Center agree with Kicillof that Macri was naive to believe that only "good manners" would attract investment rain. Cristina's debt was also low and, according to data presented by the former minister, would have risen from 48.6% in 2015 to 85.5% of GDP forecast in 2019. But they have two caveats: l. The sum of $ 113 billion of bonds actually represents a "wave of foreign investment" that will result in a gigantic debt later, while the low level of debt in 2015 is due to "the zero loan ".
The other factor that has contributed to reducing the dependence on external funds is the "monetization" of the fiscal deficit by means of a monetary question, another point which has escaped Kicillof and which has fueled rising inflation. , they said in the think tank. Lagarde and bondholders closely follow the evolution of the peso, prices and rates. The recent freeze on Essential Price's 64 products, as well as partial rates, has affected Macri's image in the markets, as well as the use of reserves to curb the dollar.
The question now is, what will the next government do with all this? At the Book Fair, Cristina Kirchner proposed a "social pact" between businessmen and trade unionists, in response to the 10-point agreement promoted by Macri. But without enough dollars to control the exchange rate and avoid its transfer to inflation, they predict in Washington that at some point prices will "steal". "There is a lot of money placed in Argentina and they will not be able to do what they want because they have to pay the Fund and the bondholders," concluded Saldías.
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