Everything has been reperfiled | Dollar, central bank, debt

It is unclear why they are more reliable than the people's governments for granting loans. Paradoxically, the last government canceled the debts contracted by Menem and De la Rúa – open to the world. The other peculiarity of favorable times for market governments is that they generate debt with high dollarization.

Given the recent episodes of deposit withdrawal and large local bond sales, by adjusting the August debt balance to the nominal exchange rate, the outstanding debt would be tentatively in the range of 105 % of GDP. By projecting, at the end of December 2019, debt as a percentage of GDP would end up at around 110%. La Rúa failed with 56 points of debt / GDP. Then, the bleached devaluation, with the pesification, the debt would represent 168% of the GDP, with Duhalde. As a result of the debt restructuring in 2005, the public debt was reduced to 39 GDP points in 2011 and consolidated at around 40% until 2014.

The private sector achieved a debt-to-GDP ratio of less than 11% in 2015. But it is more complex when we consider private debt versus equity or debt versus sales. Nadia speaks about it. We neither.

When Alfonso Prat Gay badumed the Ministry of Finance and Finance and Federico Sturzenegger BCRA's presidency, the strategy was to go back to the debt markets. For this, they paid without delaying negotiations with the remaining creditors – the vulture funds. The main objective was to gain access to the resulting "rain of dollars," which would facilitate the exchange rate and allow Lebacs' 38% rates to make extraordinary gains. Nothing original. The same thing that he did Martínez de Hoz and Adolfo Diz. So, everything started. In the end, the devaluations led to the debt-to-GDP ratio, from 57% in 2017 to 105%.

Since the high percentage of debt is denominated in foreign currency, the debt-to-GDP ratio becomes dangerous when the exchange rate rises. Every citizen should know that it is convenient to avoid borrowing in a currency that our country does not issue. Remember the dollar mortgages that Argentines have contracted – in the 1990s – to buy two-room apartments at $ 60,000, with salaries of $ 1,000. After the 2001 outbreak, the 2 bedrooms were worth $ 23,000 and the salary was only $ 250. Although his house lost more than 62% in dollars, his salary was reduced to a quarter of the same currency. It was for those who were not unemployed – about 22% of the PAT, plus the underemployed, another 23% -.

Argentina has always had a large portion of its foreign currency debt each time a crisis has erupted, but it seems that it has not learned the lesson. Even UVA loan borrowers repeated the experience of BCRA Circular 1050. It is interesting to note that the seventies, where many parents of current leaders were under-secretaries, directories or advisers.

The announcement of the market is becoming more important. The credibility of the government is dropping sharply. The interaction between exchange rate adjustment, the fear of losing governance, and the unjustified market dislike of the opposition is intensifying. In this context, the administration of the badets and liabilities of the BCRA becomes crucial. Gross international reserves, which stood at 66 billion USD, fell to 52,000 million USD. The nominal stock of Leliq plus "pbades" is close to the stock of the monetary base. That is, we have two monetary bases, despite cancellations with pesos that have allowed the dollar to continue to appreciate. The shares of Leliq have risen sharply in recent months, due to the unprecedented interest rate that pays them. They disarmed the Lebac and armed the Leliq. Good ideas do not abound.

Leliq's nominal stock has converged towards the monetary base, with the stock having increased considerably in recent months due to the adjusted monetary position of the BCRA. It currently accounts for around 6% of GDP, compared to 3.8% of GDP – which we had in January 2019 -. For Leliq's stock to be sustainable, the recomposition of monetization of the economy – the actual demand for pesos – is essential.

A stronger demand for peso-denominated badets would offset the actual extreme rates that govern. The expansion of the monetary aggregate could become the most damaging aspect of Leliq's decline. This would jeopardize the continuity of this policy, as this would eventually put more pressure on the BCRA's exchange rate and reserves.

The banks are the only agents of Leliq, since the monetary channel operates through deposit certificates synchronized with the Leliq, beyond the differential operated by the requirements. As there is a delicate balance between the Leliq and peso term deposits, which depend on real rates in local currency. If depositors come to the conclusion that the risk of a further increase in the dollar is greater, the incentive to buy from $ 10,000 – authorized – billing their deposits in pesos and fleeing the banks will increase.

The new uncertainty becomes a poisonous ferment for savers to issue fixed term deposits in pesos and spend them in dollars. If this is the case, the dollarization of monetary badets could exert more pressure on the exchange rate and reserves. With the new measures, only one problem has been solved, temporarily. Although the dollar has abated, BCRA continues to lose reserves. The potential source of dollarization comes from pesos currently in pesos deposits, although there are other sources of dollarization.

The steady decline in reserves is fueling uncertainty. His doubts were said to have been expressed to a journalist, the most important CEO of the media sector, who, questioned about the fact that the current president is coming to the end of the term, replied: "I know" is not useful. We receive many surveys of the type: – Since December 2017, the media, by far coreligionnaires, explain a good part of the governance. Remember that "real time" poverty rates are around 40%. In a year, about 200,000 jobs have been lost and the industry, consumption and investments continue to collapse.

It is true that the new forced re-inflation of Treasury bonds: Letes, Lecaps, Lecer and Lelink, with institutional investors, aims to dissipate liquidity needs in the short term, while trying to preserve reserves. However, the pressure on reserves is directly proportional to the rate of fall in reserves. It may be that even the extreme measures that have been taken do not reach. Although the Treasury's needs have declined following the unintended extension of maturities, exchange rate pressures for deposit withdrawal and peso dollarization continue.

The IMF's position regarding the announcement of a compulsive reperfilation was cautious. The entity understands that the authorities have taken important steps to resolve the liquidity restrictions and protect the reserves. But the statement did not encourage, given the uncertainty over the possibility for the same IMF to disburse $ 5.4 billion in the third quarter and the $ 1 billion originally planned for the fourth quarter.

Debt sustainability scenarios, if the same government stays in place for another four years, would be very uncertain. This is the case, since the policies to be applied – according to President Macri – in a new mandate, would be the same as those in force, but more quickly. A more acute and protracted recession would make the fall in income impossible to finance through internal savings.

The gross reserves decreasedTherefore, everything aims to force us to increase the tax adjustment. But the social environment makes this commitment difficult. There is a good chance that social protest will increase. Despite the collaboration of the opposition, the unions and even the call to refrain from the workers' pole, from the political wing of the Workers Party, are all working together to stem an epidemic. However, uncertainty can also be explained because the probability of discontinuity of restrictive policies remains high, due to the risk of social overflow.

It is obvious that whatever the next government, it will be necessary to renegotiate the agreed program with the MFIsto prevent the crisis from becoming a tragedy similar to 2001. Again, the IMF's recommendations have contributed to exacerbating the country's problems.

The risk of a new illiquidity event is not small. Although Lacunza announced a partial compulsive restructuring, he hinted that all was not said. Legal certainty is already decimated. The discontent of investors who have been forced to reschedule their maturities is high. A local business man came to say much louder than "everything was reperfiled". The forced extension of debt – local law – Treasury bills: Letes, Lecaps, Lecer and Lelink, in the hands of institutional investors, was not a good idea. That's how Cavallo started with the AFJP, the first part of the MegachangeIt was coercive.

These measures to address short- and medium-term illiquidity and safeguarding reserves have given rise to all sorts of suspicions. With regard to local and foreign law obligations, the government "clarified" that the new profile would not include capital cuts or coupons and promised to honor debt service during negotiations. However, any discussion of external and local legal ties is likely to await the establishment of a new government. For local bonds, the extension of the term requires the approval of a bill by the Congress, today absolutely dubious.

Let's change little what Menem-De la Rúa did and add capitalism to the friends of the dictatorship. Let's change to restore these failures: devaluations, galloping inflation, default and poverty.