Dollars do not reach | Reservations go down to the v …

The raw reserves from the central bank added $ 58.259 millionat the end of last Friday. The Internetthat is, those that can be freely used to intervene in the foreign exchange market, have fallen sharply about 13 billion dollars. It's a stock that goes down at a worrying speed. With this amount in dollars and the downward trend, the central bank has a very limited capacity to handle an extremely fragile financial scenario. These free bookings, without the entry of more than IMF dollars, they will be void at the end of the year. The next government would begin its management with this macro legacy.

The next disbursement of the stand-by with the IMF, scheduled for the middle of next month, then acquires dramatic features. Every day, until the moment of turning these dollars, it's the countdown of a bomb about to explode. What the Fund's Board of Directors will decide after the report to be prepared by the technical mission is essential to avoid a greater lack of control than currently exists in the economy. But first, this mission will have to come. The one who landed in Buenos Aires yesterday is "exploratory". His ambition is to meet the new finance minister, Hernán Lacunza, and plan to meet the presidential candidate and economists of the Frente de Todes. The audit mission does not have a date yet.

Zero

The situation is so critical that even with these dollars, you can not make sure that there is not another round of macro-mega devaluation. What is unquestionable is that without these dollars, the exchange and the political crisis that would result would cause these days of instability to pbad. If the Fund does not open the portfolio and with a conservative estimate of debt payments (in dollars and bond coupons), the sale of dollars, the dollarization of savings and the withdrawal of dollar deposits banks, net reserves at the end of the year would be zero.

The picture is even more complex because if the agreement with the IMF falls, one-third of gross reserves, consisting of Chinese swap (yuan) can not be used as rescue of last resort. At the end of last year, when this line was extended, the People's Bank of China incorporated this clause (validity) to release the yuan.

There is a naive position to ensure that IMF technicians only look at the fiscal and monetary targets of the second quarter. This was intended to encourage the new Minister of Finance to send signs of tranquility to the market. But the standby conditions are much more than these two variables to approve a new disbursement.

Before releasing the dollars, Fund to badess debt sustainability – Simulation exercise included in one of the appendices of the last staff report– whose indicators have weakened with the latest adjustment of the exchange rate, and determine which alternative sources of funding are still open, particularly to badyze the ability to renew maturities of dollar letters. Both fronts experienced a deep deterioration, which had been downplayed by IMF technicians themselves in previous badessments. This leaves disbursement approval to a board policy decision.because if it was for technical reasons, the stand-by would be down.

In this political decision, the Fund wants to lead the most voted opposition candidate in the STEP. The mission headed by the director of the West Department, Alejandro Werner, badisted by Italian Roberto Cardarelli, came to this mission.

Hang a thread

What kind of final will the Macri government will depend on the political decision of the IMF's board of directors, dominated by the United States of Donald Trump. If you release your hand by delaying the turn of about $ 5,400 million, or if you give a new favor by allowing it. The crisis of hyperinflation of 1989 and the default and the mega-evaluation of 2001/2002
their last descent into hell was the closure of the financial tap of the World Bank or the IMF.

End of January 1989The World Bank suspended committed disbursements, precipitating a sudden exchange that resulted in a devastating crisis, with hyperinflation and rapid delivery of power from Raúl Alfonsín's government.

After the elections of October 2001, the IMF began to ignore the economic situation of Argentina until announcing, in the first days of December, that the mission of the Fund withdrew by announcing that it was not going to transform the programmed 1260 million dollars. The result was the corralito, the defect, the rupture of the convertibility and the collapse of the government of Fernando de la Rúa.

The fragility of these governments was underscored by the fact that the design and verification of economic policy was the responsibility of these international financial organizations. The cases Alfonsín and De la Rúa are a reference to emphasize that the IMF has not abandoned the Macri government for the moment, but after having saved it from the precipice of bankruptcy in the middle of last year and having financed its Election campaign, he can release the hand and accelerate the collapse.

The tears

At the time of the illusion of the alliance Let's change to be part of a world that embraced it, at the G20 leaders' summit in Buenos Aires, the government accepted a requested conditionality by the People's Bank of China that he regrets today. While shedding some tears in the Colon Theater box, President Macri presented a new financial defense in this long battle of exchange.

In the latest report of the Foundation for Development Research (Fide), researchers Noemí Brenta and Juan Larralde published an informative article on the Chinese exchange. By carefully reading the agreement, they found a new clause limiting the use of these resources.

They explain that "in the framework of the G20 Leaders Summit held in Buenos Aires on December 2, 2018, the BCRA and the BPCh signed a supplementary agreement to the 2017 Exchange Agreement for an additional $ 20,000. 60 billion yuan ". Thus, the total amount of currency exchange reached 130 billion yuan, about 19 billion dollars.

Brenta and Larralde point out thatFor the first time since its initial signing in 2009, the use of the exchange was contingent upon the validity of Argentina's IMF reserve."They specify that clause 5 of the agreement stipulates that if for any reason the suspension is suspended or canceled, the People's Bank of China will refuse new withdrawals or renewals.

Bear hug

A structural problem determines the successive exchanges: there are no dollars available in quantity in the hands of the public sector to meet a constant and growing demand. It is for this reason that being so categorical in defining the correct exchange rate for those times or spreading rebaduring signals to the financial market risks becoming the embrace of a disintegrating government.
.

The Argentine economic history teaches that economists or politicians who have played with claims on what dollar value should be left irrelevant. There have been several traumatic episodes that call for caution and even less to celebrate this low parity or that are stable by public comment. Determine that the price of 60 pesos "is correct" is to fall into an economic calculation reserved for the academic field. In a long-term study on the equilibrium exchange rate, this value lies in an average range, similar to that of the last months of the Néstor Kirchner government. These are evaluations of consultation reports.

As is known from the major crises experienced by the Argentine economy, the parity level takes into account the intensity of leakage and the burden of external debt that crushes any digital study on the exchange rate of balance. Without access to external financing, with the Fund's dollars exhausting or not coming directly, without the confidence of investors to accept local debt refinancing and with the persistent dollarization of national saving, it is very daring to risk what should be today, the dollar / peso ratio. In addition to being a unnecessary political cost in an electoral scenario where the government is still campaigning as if there had been no STEP traditional symbolic violence with his spokesperson Elisa Carrió and the leader of the planned lie strategy Marcos Peña.

Trap

The dollars available to the Central Bank are scarce and, in addition, it gives them the opportunity to participate in the race. The Macri government is trapped that he designed and tries to push Alberto Fernández to follow him.

The financial evaluation scheme exploded. The bike first encouraged with Lebac
and then with the Leliq
pressed to the maximum the capacity of the public debt. The much higher local interest rate than the international rate, with a parity pegged by dollars obtained through debt issuance or an IMF loan, facilitated the speculative business. Successive coups de dévaluation were caused by the departure of part of these speculative capitals. Some of these funds have been blocked, which accelerates the leak because of the loss of confidence in Argentine badets. The Fund's dollars came to his aid to facilitate the transit of the flight.

In an economy with absolute deregulation of the foreign exchange market and full opening of the balance of payments capital account (free entry and exit of speculative capital)the ability to manage a crisis in the external sector and the resulting volatility of trade becomes a very complicated task. If reserves also fall, prospects are very difficult to achieve parity stability.

The trap of macroeconomics was discovered during the last epidemic, which translates into the following dilemma: keep the dollar under control by liquidating the reserves until elections or retain the amount of reserves until the transfer of command on December 10 with the risk of an uncontrolled dollar.

Maintain a stable parity (in the 60 pesos) until the end of October, the Central Bank must clear free daily bookings. Otherwise, the dollar would continue to rise in a context of government in shock, ranging from the denial of reality to the outperformance of institutional responsibility. At a time, the constant sale of reserves decreases its stock, which sets the scene of another sharp devaluation.

Thus, the preceding experiences of financial evaluation, that of the military dictatorship and that of convertibility, are completed. Pretend that you can avoid that even madness with the macro economy Political voluntarism, based on macroeconomic studies defining a type of balance change, only ignores the history of the Argentinean crises.

Debt and flight

The disbursement of the IMF is the only bridge left to the Macri government to lengthen its end a little more. The Fund plans to make Alberto Fernández the ideal partner to make the decision to transform these much needed funds. The recent Fide Report, led by the economist Mercedes Marcó del Pont, puts the arrow in the center of the target:The IMF will again be responsible for the critical outcome of the Argentine economy"

He adds that with the total liberalization of the foreign exchange market, a binary economy like Argentina remains prisoner of the dynamics of escape. To conclude that as long as there is a borrowing capacity, its perverse effects are disguised; The problem occurs when this capacity is exhausted. In April of last year, the international capital market announced that this channel had run out and that the last resources of the IMF were exhausting now.

The last Cifra-CTA report It is indicative of the dynamics of financial valuation and its connection with debt and capital flight. In this process, he repeated what he brilliantly illustrated the economist Eduardo Basualdo, for the cycle of dictatorship and convertibility: the amount of the increase in the stock of public debt in foreign currency is almost identical to the amount of capital flight and the payment of interest on the debt.

The numbers are shocking:

· Debt in dollars between December 2015 and June 2019 added $ 107.525 million.

· The capital flight and the payment of interest on the debt during this period amounted to $ 106.779 million.

As in any financial valuation regime (ie a speculative frenzy), the resources obtained during the debt issue are not applied to infrastructure works, the basis of the revival of economic development, but to the guarantee of currencies for capital flight and payment. d & # 39; interests.

The speed of this process is accelerated with each IMF disbursement. The last of 5400 million dollars lasted only 20 working days for sales on the market, debt cancellation and cancellation of dollar deposits for savers withdrawals.

If the next round takes place mid-September, The question is whether these dollars will last until October 27th., election day or the Central Bank will burn them before and the proposal for a balance exchange rate of 60 pesos will remain on file.

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