Elections and crises of 2019: the restrictions of the future popular government

The real heavy legacy is that of macrismo, which leaves a rope around the neck of a possible new popular government. What are the alternatives?

April 13, 2019

Dreams (and critics) at the end of Kirchnerism were move forward in a development process. Develop ways to transform the productive structure to increase exports and / or replace imports. If this process is avoided, it is not possible to continue with social inclusion, that is to say that it is not possible to increase the mbad of wages because increasing wages also implies a greater demand for dollars. Indeed, after meeting basic needs, wages begin to demand products with a high mix of imports, from a cell phone to a motorcycle, a car or trips abroad. It is an undeniable fact that these restrictions can be ignored only if one thinks that, in globalized capitalism, the consumption patterns of the population can be modified.

At the end of Kirchnerism, after a decade of growth in the wage bill, imports grew faster than exports and reappeared, as of 2012, a structural phenomenon of the Argentine economy: the relative scarcity of dollars or external restriction. The good international prices of the first decade of the 2000s left a window of time longer until it reappeared. The problem of vulture funds that could not be solved, a situation with a strong political and geopolitical component, it was not possible to capitalize on the reduction in long-term debt initiated in 2005 return to the financial markets and obtain the necessary development dollars. Beginning in 2014, the impending change of government put a long-term transformation plan on hold. A similar transformation required consensus among the dominant sectors, or at least a clear majority.

The projects of the two main forces that faced each other in 2015 were, on the one hand, to advance development, which also had to improve relations with global financial markets, and on the other hand, the necriberalismo macrista. The first case involved the use of debt to finance the transformation of the productive structure. We do not know if this has been done, but development was at the center of the debate in sciolism. The second case knows how it ended. Let's change the possibility of going into debt to finance development, a task that has left a supposed rain of investments that never arrived. To make matters worse, the same strategy of accelerated debt without counterparty generating repayment terms was quickly noticed by the same new creditors, who, after placing more than $ 100 billion in new debt in the country, they began to notice that they had made a bad move. They had been swept away by the colorful mirrors of the so-called change of government "friend of the markets". In 2018, the macrista model flew through the air. He was born under the protection of external indebtedness and the markets stopped lending him. The lack of exchange rate control by the Central Bank did the rest. Argentina returned to the IMF with a dollar that doubled its value. The change of scenery was radical.

Since then, the only strategy of the Macrist administration is to try to avoid at all costs a new mega-devaluation that triggers hyperinflation and a defect. To avoid this scenario, the IMF will have placed, near the end of the administration, close to 60 billion dollars which add to the debt contracted with individuals. The counterpart was have curbed dry economic activity, the typical monetarist fund strategy to fight against external crises, balance of payments, but worsened by the macrismo which decided to proceed with the adjustment mainly on the expense side and not taxes. Cambiemos realized the prodigy of being on the right side of the IMF with which he did not negotiate anything and set the goal of a zero deficit in record time.

The return to the world of Alianza Cambiemos could not be more violent. If in 2016, in the central countries, they were delighted with the new drummer of populism and free market champion of South America, in 2019, they observe the name "Argentina" as the new plague of markets. They have reasons for mood change: the bad badessment they made of macrismo. Many investment funds that have buried billions of dollars in the local economy they do not know how to go out without writing a red on their balance sheets. For now, they are waiting, but they expect only the least expensive output conditions to be generated. All local variables are linked with a thread. When there is an improvement in bond prices, there is an avalanche of sales, the super rate paid to banks by the badets of Leliq can not fall without increasing the dollar. And the dollar can not go up without triggering inflation. And if the dollar goes up, the weight of the debt increases on the product. Despite the complexity of this scenario, the government has chosen to let inflation variables continue to operate, such as tariffs and fuels.

Until the month of October, there will be great uncertainty about the price of the dollar

The above has two consequences for the immediate and intermediate future of the economy. Until October, there will be great uncertainty about the dollar price. Many scholars think that liquidation of $ 60 million per day authorized by the IMF will not be enough to calm the pre-election demand. If it does not reach the stage, it will become really unpredictable. However It is difficult for the IMF to abandon Argentina. The Fund also has a lot to lose and the United States is geopolitically interested in the continuity of macrismo.

The IMF has come to stay.

Hopefully the administration Change we will have squandered $ 200 billion in debt this will be inherited by the future government, which will have to renegotiate them. This will have obvious macroeconomic effects. The next government will not have external funding, except what can come from bilateral infrastructure agreements. The IMF does not ignore this scenario and knows that it has to renegotiate with its main creditor. The room for maneuver of any administration will be limited.

The alternatives for 2020 are two. To follow model of an extended facilities agreement taking into account all the conditions of the IMF with regard to the reduction of more labor and social security reforms or, as the economist suggests Emmanuel Álvarez Agis, with secure responsibilities in a future people's government, take advantage of the margins of other models depending on the Fund that leave some room for growth, such as Portugal and Spain. The idea is to extend the search for zero deficit over time, for example in a term of 8 years, make the most of the funds earmarked for social badistance and fight a floor of a product point for public investment. Of course, we oppose structural reforms that are harder to support politically. It will be the external air conditioner, the economy will not be able to borrow, but it will not be indebted either. Demand can be used, but only to the extent that the available dollars permit.

The dreams are not those of 2015 anymore. It will take years to overcome the heavy legacy of macrista waste. The IMF has come to stay. The option would be a stronger break, which would require "anti-systemic" social cohesion that does not exist today and, therefore, could have more costs than benefits.