The five economic keys to taking care of Paso

The economy is the big weak point of the ruling party. It does not reach these elections by hitting it as it was presumed until three months ago, but the collapse in 2018 of all the indicators that mark the pulse of social humor has woven a complex scenario for the ruling party. The question that arises is whether the modest recovery shown by some indicators at this time of year will have an impact (and to what degree) on today's primary elections, in October and, possibly, in November? .

The big question is how the markets will react tomorrow, what will be the pressure on the dollar and how the plant will react to a possible increase in greenback demand.

The market will indicate if the Argentineans are oriented towards the continuity or the change of direction of the country. Starting tomorrow and until October 27, five variables will need to be closely followed.

What data will the market look at tomorrow?

There are three facts that will determine the mood: the voter turnout at the election, if one of the candidates exceeds 40%, and what is the difference between the first and the second.

In Pbad 2015, 24,021816 people voted, with a 74.9% share of the register. In general, participation reached 81.1%, with 2.02 million additional voters. The presumption is that the faithful vote of the formula Fernández-Fernández will be fully present in the Paso and that it will not develop as much in the general as if the ruling party could develop, capturing the disappointed or what They went to another alternative.

That happened in 2015, when Daniel Scioli got 38.41% of the vote and Mauricio Macri, 30.07%. This difference was not interpreted as a victory for Scioli.

What is the margin with which the market is speculating now? Up to five points in favor of the Fernández-Fernández formula are considered reversible by the government; the alert turns on between six and seven points and more than eight points are considered irremovable by the ruling party.

If one of the candidates exceeds 40%, there will be more benefits for the general, which was not achieved in 2015.

They will also attend the performance of José Luis Espert and Roberto Lavagna, whose voters would be closer to the party in power than the opposition in a final ballot.

Last Friday, the Merval grew by 8% and the country risk was down 4% due to the redemption of Argentine debt bonds, which was interpreted as a positive expectation of the markets compared to the results of the 39; aujourd & # 39; hui.

Clearly: there are several more readings compared to today's result, but Macri would lose up to five points and would be welcomed by the market, which relies mainly on the continuity of the party at the end of the day. power.

What pressure will be on the dollar

Depending on the results and the interpretation of the market, it will be seen whether there will be increased demand for dollars.

Here there are two questions: there will be pesos to buy those dollars and there will be dollars available to be sold.

Economists warn that there are very few pesos available. On the one hand, because dollarization started a long time ago, and on the other hand, because the central withdraws pesos since last October. Despite an annualized inflation of 55%, the number of pesos in circulation is decreasing.

"The level of monetization of the economy is very low, it is equal to the first half of 2002," says economist Fernando Marengo, Arriazu study and badociates. "There have never been so few pesos as now," he concludes.

The monetization of the economy now equates to 13 GDP points, while in 2017 it was 17 points. It's a phenomenal fall. In the hyper 1989 and 1991, monetization fell to 8%.

To cut the cash amount by five points, the central bank is expected to sell about $ 15 billion to 46 pesos, a figure that suits him perfectly.

Clearly: there is little weight available and, what would seem, can be provided by the plant.

What will the central bank do with reserves

If the pressure on the dollar increases, the central has three ways: continue to increase the interest rate; to continue to intervene in the future dollar, as it has done so far, and sell cash reserves, as the IMF allowed it, with permission, but what it did not do until now.

The interest rate has accumulated five points over the past 15 days and closed at 63.71% on Friday. All indications are that the ascending path will follow. This is the tool that helps maintain the interest for the Leliq, which controls the amount of pesos in the economy and, in turn, guarantees positive rates for term investors . If they soften or increase less than expected, they will have to buy dollars.

Until yesterday, the plant sold $ 950 million in the future and could allow the IMF to sell up to $ 6,500 million until next September. The future dollar ensures that, at a certain date, the market will obtain dollars at agreed prices, which would reduce the volatility of the green.

But the Gordian knot is whether or not it will sell cash reserves, which requires a daily permit from the IMF and "disruptive" conditions. You can get permission or you can not get and sell the same. Here, the answer is more political than the exchange rate: if the plant occupied reserves, it would trigger a new crisis and reduce Macri's chances of victory. This would leave the reserves intact in opposition and a high exchange rate, the best scenario that Fernández could aspire to, what he had already anticipated by considering that "the dollar is late".

Analysts believe that, with or without authorization, the plant will sell the same thing. We must also look at what the field is going to do: some say it will speculate with an even higher dollar to liquidate what is left of soybeans and what will come from wheat and some say that, fearing greater retentions of the Fernández, he will hasten to liquidate quickly.

In short: the plant will avoid a dollar and will sell. What he has achieved.

What will happen to inflation and rates?

On Thursday, Indec will release July data on the consumer price index. Inflation between 2.2 and 2.4% is expected, although some versions have announced Friday not to exceed the 2% mark. Beyond the exact figure, another month of deflation would be woven after the peak of 4.7% reached last March.

Similarly, projected inflation for the year is around 40%. In 2018, it was 47.6% and this would be close to 38.5% for Cristina in 2014, although there is an exchange rate, a delay in utility rates and used fuels.

The problem is that the slowdown occurs very slowly. Moreover, in August, it could slow down given the rise of the dollar last week, but we will have to wait to see what happens in the second half of the month.

The other problem is the reorganization of the margins that companies could apply: this is what they resigned at the height of the crisis and which, with some improvement in consumption, could aspire to recover. In addition, there are companies that have not been able to adjust their prices to the inflation rate. In June, inflation had risen 22.4% and the dollar, despite the rise of the past few days, had risen by 20%.

With regard to utility rates, the government has suspended until the end of the month the planned increases in electricity: 4% in May and the same in August. For gasoline, it engages in the climb, although it divides it into three tranches (April, May and June) in order to spread the impact on inflation.

Fuels are deregulated, although the national government has decided to switch to fuel tax prices, a marginal tool in terms of price, but ultimately containment.

The most recent chapter concerns urban and interurban transport, in which official subsidies have fallen, but much less than those intended for electricity.

What will anyone say about anything that has not been talked about

None of the formulas explain too much the concrete steps that will be taken to revive the economy, improve real incomes and curb inflation, desirable goals for all candidates, regardless of the party seal.

It is badumed that those who remain in the race should give more details, in order to convince the undecided, those who did not go to vote and those who bet on a third option. This should begin to be clarified from tomorrow.

There is a coincidence in the market that, for Argentina to grow and develop in a sustainable and non-intermittent way, it must open up its economy, change the tax structure, modernize labor relations, strengthen exports, reduce spending and consolidate surpluses. Commercial and fiscal. It would be the combination that would create a real job and allow for growth at the same pace as that of the countries in the region for some time. You must first stabilize the macro then bet on the structural reforms. Neither for one thing nor for the other, there are no details about the candidates.