"The government should give signs that things will persist after the elections"

The former Secretary of Finance (1999-2001) and Quantum's director, Daniel Marx, gives his point of view on the financial instability that Argentina is going through during the election year, asking the signs of predictability and underlines the need to move towards a new agreement. with the International Monetary Fund after December 10th which is considering growth.

Did the IMF finally understand that the free float did not work in Argentina and that is why it now allows the Central Bank to intervene or throws the ball directly to the government and leaves the issue under its control. only responsibility?

– I think the Fund continues to think that the IPO is a proper regime for many countries, and that this will include at one point also Argentina. Now, the flotation can be clean or it can be managed, but I think the ultimate goal is to move to the cleanest flotation. And in the meantime, he admits that there are extraordinary circumstances that may require a better managed regime and, in this sense, gives him the responsibility to manage, in certain parameters, the Argentine government.

Would this intermediary or parenthesis be the entire electoral process of 2019?

Yes In addition, the same program with the Fund, the second of last year, already provided for a foreign exchange surplus provided by the IMF with regard to the government's foreign exchange needs. And that was not necessarily all going to accumulate reserves.

What do you read about what happened last week? Why can the dollar and the country skyrocket? The government has attributed to the investigation that shows Cristina on Macri. It's like that?

-I think it's a factor, but it's not the only one. I think that there is and that there will be more and more doubts or uncertainties as to how the problems will evolve in 2020, due not only to the outcome of the elections, but also the type of program implemented. What kind of negotiation will the Fund face and, therefore, how to access the voluntary financing market? And some think that this will require a system of governance and congressional support, which also affect what happened last week, mainly with bonds, rather than the exchange rate.

All of these doubts could be dispelled as the candidates – who are still unclear – begin to explain their government programs and make it clear that they are not considering moving to a default?

-I think so, but they will still ask to understand how it will be done.

And what can you do as the government tries to regain the trust that is clearly not generated in today's markets?

-C & # 39; is a weakness in Argentina, in other countries there are elections and there is not much noise in the financial market, and I think it is a weakness because you do not see institutions, rules or very strong action programs that go beyond differences between political parties. I think that the government should look for solutions to show signs of persistence, beyond the electoral question itself.

Continuous changes in the rules of the game, groups, then the ceiling of the group, now the intervention of the BCRA, do not increase mistrust? For now, show that the government does not find the return.

-It's about essential questions, if they are placed in a more complete context, they may help or can not help, but I think that's a little bit what is required, plus the context that what can be such specific problems.

There is also concern about how the next government will manage debt commitments. In fact, part of the IMF's money, the $ 9.6 billion, is currently diverted to curb the dollar. Does Macri leave to anyone who comes to him – or to himself – a complicated inheritance there too?

-You must see what opportunities the next government has, I believe that they will take care of it, the Fund will also ensure that all money is not spent now and that it nothing remains for next year.

But the $ 9.6 billion was not originally intended to pay a debt?

-This part was already planned, above, no. There is a part that was already stuck in the program last year, an excess. In fact, there were 8,000 million, but it has accumulated in reserves, they say, 1,600 million more.

The measures taken were intended to show the internal public that it was taking care to contain inflation – rising blockage rates, essential prices – what were the consequences for the outside world? Because the country risk has also increased after this announcement.

-I think there have been several impacts, last month's inflation rate, these measures a little out of context and investigations Everything had been going on for just a few days.

What will happen when inflation will be known in April, which, according to some, can be 4% or more? Can we generate a new race or trigger country risk?

-We have a tendency to weaken what is called the country risk indicator, we have to see what is anticipated or not and what is happening on other fronts, that is, what is happening in the country. is a factor, but I think at this point it is not the decisive factor. Although we must not ignore it either.

What should the next government do with the agreement with the IMF?

– I think the renegotiation will concern several issues: in fact, for the Monetary Fund, it is a negotiation and not a renegotiation, it will be a matter of new agreement. What are the elements? For some, it is the fact that the Fund has significant maturities starting in 2021 and that we will try to eliminate this demand by the deadlines. Second, the IMF and the government will say, "This program should no longer be financed exclusively by one year, but it creates the conditions for Argentina to regain access to the market." And it also means how fiscal accounts are aligned in the medium term and what structural reforms can be implemented to justify a longer program of the Fund and attract investment.

A growth program?

This is why we say that we need to attract investment and that for the Fund there are problems they call structural reforms and anything that can take the form, no longer a stand- by, but from a program called FEP (Expandable Fund of Funds). You have to see if this is treated early or later in 2020, that is, it starts as a new, shorter reserve program, and then turned into an EFF later.

Will the IMF need additional adjustments?

– I do not know if the adjustments, they will say that it will be a growth program with these other reforms, it is necessary to see what title is given.

As long as there are political agreements, if not, how will they proceed with the structural reforms that require consensus and Congressional approval?

– That's right, that's why I was talking about the fact that it's not just a political issue, and a lot of people see that it's going to be this way and that it's starting to have an effect .

Is the dollar in its current values ​​still competitive?

– I think in general terms, it looks like it's competitive, but there's the pressure of rising costs at a rate that has to be seen if it does not end up eroding this so-called competitiveness. Then there are the questions of uncertainty over withholding taxes on exports, which are considered rare. Competitiveness depends on other factors, productivity and not just the exchange rate.

Can the possibility of increasing withholding taxes speed up the liquidation of agricultural currencies?

-I think they will operate cautiously, one part is to meet the needs, that this will happen – by paying suppliers and certain debts – and beyond this threshold, it will be prudent (liquidation).