The default of the macrista economy

The Argentinian crisis is aggravated and the plans of the Macri government are ineffective.

April 25, 2019

It is not necessary to read the reflections of the international press for learn that what Macrismo calls "the world" has dropped his thumb to Argentina. Jumping from day to day of financial market dizziness, the sequence of the fall is quite short. Already in 2017, world finance warned late that Argentina had been over-indebted.

In the first months of 2018, external credit was completely cut off and went to the MFIs. The causes of the events were and are simple: an economy faced in 2015 with a problem of relative scarcity of dollars temporarily increased by indebtedness. As the debt is destined to flee and not to develop, the problem has become worse. "Markets" have warned and cut off foreign currency flows to the country. Large investment funds valued the carry trade, the differential they had made with the Lebac in pesos, they returned in dollars and began to withdraw from Argentina. In the starting line were the most informed. The almost immediate result was the loss of half the value of the local currency, with a dollar drawing from 20 to 40 pesos.

The technical debate on modes of intervention is not relevant today. A better or worse intervention in the foreign exchange market can delay or accelerate events, but that does not change the structural problem, which continues to be a demand for dollars much higher than the supply.

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Faced with the debacle, The United States, through the IMF, has decided to give an engine to the Argentine friend. It was and it is geopolitical: avoid the fall of a key government in the region and, with that, also avoid the return of so-called populism. The arrival of the IMF has worsened the perception of financial players. At reading, an economy to which the Fund had lent more than $ 50 billion probably posed more serious problems than those on the surface. The plan with the Fund was the starting flag for a complex investment fund decision. The key question was what was the best time to let the Argentine economy minimize its losses.

In principle, the IMF appeared as a guarantee of dollar supply for the exit, but as the available dollars dwindled, the threat of the "Gate 12" phenomenon appeared. Today, all investment funds with Argentine newspapers know that they will lose. It is then a question of leaving as soon as possible. This is why local debt and equity are burned in the air. The economic result is the sustained increase in country risk and the fall in ADR, the shares of local companies listed in New York. With the crossing of the 800-point barrier, the operators badumed the collapse. Thus, the barrier of 1000 points was exceeded in a few days. The top of the dollar at 47.5 is only the emergence of what is coming. There will be no rate barrier and currency sales that breaks the trend as long as no one is forced to liquidate exports and that there is no restriction on capital outflows.

The local economy is already in default. The challenge has ceased to be the administration of the external constraint. Today it is a question of controlling the collapse. But the effect Door 12 is not suitable for anyone. It takes about $ 10 billion from the IMF and much more from international reserves. Everything will depend on how times and anxieties are managed. It is true that a multi-billion dollar barrier could be more helpful in stopping a race than liquidation liquidations that the IMF has "allowed," but better intervention in the currency market will not change the structural problem . Dollar demand flows will continue to outstrip those of supply, a tick of the macristal economy that is neither solved nor treated in Comodoro Py for any opposition. During, Millions of Argentines who live off their work will continue to witness life and the way in which their income and hopes are liquefied by the day and whose economy is plunged into a void whose bottom is not still visible.

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