The macrista of insolvency | The leaking of the arge …

Interest on the debt represented 15.65% of the Treasury's total tax resources in the first three months of this year. During the same period in 2016, they added 7.60%. Since the beginning of the Cambiemos government, the projection of this indicator was constantly increasing, reflecting the increasingly heavy burden of public accounts of a dizzying debt. The fear of financiers and badysts of the establishment of the declaration of a default in a possible third government of the CFK is quite prejudiced. Cambiemos' economic policy has resulted in the current insolvency situation; This was not caused by populism. The default of Macri has been avoided by the IMF. Kirchnerism in government management, however, has become the political cycle of the highest paying debt in net terms since the restoration of democracy. It is also exaggerated that the world of finance is loath to have Kirchner come back to power by considering the possibility of a renegotiation of the maturities of his debt, because there is a consensus in the city that there is a case where the 2020-2023 government should lift to the market. There is no doubt that in order to gain some leverage in dealing with the economic issue, it is essential to redefine the timing of interest and capital payments, including the large loan from the International Monetary Fund.

Vicious circle

The Department of Finance 's quarterly and annual debt reports show the accelerating deterioration of solvency indicators over the three years of the macroeconomic economy. From the legacy of debt reduction, in the first two, the stock of external liabilities has risen to critical limits. The share of dollar-denominated debt has also been increased, which has plunged the public accounts into a more fragile state in the face of a scenario of sudden devaluations, such as the one that has been taking place for a year.

The negative effect of the sharp increase in the exchange rate on the debt situation is twofold. One, due to the increased demand for pesos, funds that the Treasury gets with the perception of the tax to pay the interest payment in dollars. Devaluations result in more pesos being required to purchase the necessary dollars to meet these commitments. The second, related to the deterioration of the debt / GDP solvency indicator, is that a devaluation maintains the liabilities in foreign currency while the product expressed in dollars depreciates. This deterioration reflects the fact that the debt represents a larger proportion of the sum of the wealth of goods and services generated during a year, which implies a loss of economic solvency.

The higher interest charge (more pesos to buy dollars), in the current economic program audited by the IMF – the main institutional creditor – will imply a stronger adjustment of the rest of the public expenditure items. The cuts will aim to free up resources to pay the debt service. The fiscal adjustment dynamic is already being verified and celebrated by the Minister of Finance, Nicolás Dujovne.

In the first quarter of the year, there was a primary surplus (difference between current income and expenses) of 10 347 million pesos, a balance obtained by a reduction in public expenditure of 14 percentage points in real terms. compared to the same period in 2018. This balance This becomes a deficit when the financial result is added (interest payments on the debt), which was very negative, rising from 91,523 to 114,782 million pesos.

This macrista economy behavior (more debt and dollars with a megaevaluation that requires more adjustment) reinforces a recessive outlook that, at the same time, complicates debt repayment capacity due to the reduction of budgetary resources and the fall in GDP. This is the vicious circle of insolvency in which the economy has been thrown.

Difficult data

In addition to the increase of the dollarization of the debt, the administration of the external engagements for macrismo shortened the maturity profile, concentrating more the pressures on the public finances. The question of the possibility of declaring a new default arose because of the accumulation of interest and capital maturities over the next four years of the next government, especially the first two. The amount required to meet these commitments with the private sector (to the exclusion of international organizations and the public sector) amounts to about $ 42 billion in 2020-2021.

Other official figures categorically show the extreme financial fragility:

• The gross debt of the central government amounted to $ 332,192 million at the end of 2018, or 86.2% of the gross domestic product. In 2015, the debt amounted to $ 240.665 million, or 52.6% of GDP. In fact, the amount was lower: 222 703 million, but for that year, the macrismo included 17 962 million in the report.
• Of the total debt at the end of last year, 148.054 million euro corresponded to private sector creditors and 57.950 million to multilateral organizations.
• Dollar debt represented 76.4% of the total, up seven percentage points from 2015.
• As mentioned earlier, private sector debt maturities total about $ 18 billion by 2020, to which an additional $ 8,500 million is being added.
• The average life of the gross debt fell to 7.3 years from 7.8 years in 2015 and 11.0 years in 2010.
• Foreign currency debt as a percentage of reserves amounted to 381.4% at the end of 2018 and, as a share of exports, rose from 212.6% in 2015 to 331.2% in 2% in 2011. This last indicator shows that the generation of dollars by foreign trade does not show much dynamism. The latest trade balance data has once again shown that large devaluations do not encourage exports. The exchange rate doubled in one year and overseas sales fell 5% over the same period.

Country risk

Macrista's economy not only did not encourage the inflow of foreign investment dollars, it did not encourage the generation of dollars for export. With a capital flight that has increased in recent years, without favoring the conditions of dollar inflow, when the external debt gates are closed, the crisis is precipitous.

Any rigorous badysis outside fundamentalism M, with these figures, makes it possible to conclude that the risk of default appears with the administrative change. The situation is all the more shocking as the legacy was deleveraging. It was the IMF that saved Macrista's economy from the default situation after Wall Street closed the dollar last March. A few weeks after this slammed door, the exchange rate rushed, with a central bank under the command of Federico Sturzenegger, who wasted billions of dollars without knowing how to stabilize the foreign exchange market. The inability of the BCRA to lead a run led to a desperate hug for the IMF. The finance minister of the time, Luis Caputo, then headed the power plant, especially his money table inspired by finance engineering. Management that has led to another resounding failure with the liquidation of billions of dollars, this opportunity offered by the Monetary Fund, without being able to stabilize the market. The first agreement with the IMF was broken, Caputo was revoked by the director general of the international organization, Christine Lagarde, and a second agreement was signed for a total amount of 57 billion dollars.

This visit is useful to contextualize the current financial crisis with the fierce race against Argentine badets (equities and government securities) and to move away from the vulgar badyzes that explain the country risk of 1000 points for the electoral competitiveness of CFK. This indicator in the record values ​​of the government of Macri originates from the great fragility of the economy. This is at the default level, an instance that, as noted above, has been postponed because of the IMF's extraordinary loan. As we approach the moment when these funds are exhausted, which will be next year, and without any signs of a recovery in the economy, the big banks and international investment funds have decided to anticipate this event and have begun to dispose of Argentine stocks and bonds.

The fall in the prices of government securities is offset by the increase in country risk, an indicator whose name is EMBI (Emerging Markets Bonds Index) and is calculated by JP Morgan-Chase. This means that if the government wants to issue debt on the international market, it should offer a rate of nearly 13% per year, a very high level that prevents access to voluntary financing of the capital market.

Trap

The fund's purpose was to save time in the hope of achieving the reopening of the credit of the world of global finance. But the countdown of this clock is progressing and macrismo does not show the necessary reaction capacity to improve the economic conditions to excite the financiers. The government does not do much if the last official announcement announcing the economic measures begins with: "We think that, having begun to stabilize the exchange problem …", and a few days later, a new phase of Devastating race already bursts more than a year.

The extension of this setback makes it possible to rule out the fact that CFK's electoral competitiveness is the driving force behind the liquidation of Argentine equities and bonds. The flight is concretized by the evident inefficiency of Macrismo for the treatment of the economic situation. Now, they are saying that they are asking the IMF for permission to sell more dollars. At the same time, the Fund needs to improve tax collection, sanctioned by fiscal adjustment, through an increase in withholding taxes. Finance and central bank officials would also negotiate a bridging loan with international banks, including Britain's Barclays Bank.

It is interesting to compare the record country risk levels of the Cristina and Macri governments. In the first, the maximum was barely above 1950 points, in a very unfavorable international context, with the global financial crisis precipitated from 2008, with the harbadment of vulture funds and Judge Thomas Griesa exerting a stifling pressure to block the payment of interest on the debt, and with a very strong exchange control regime. In the other, the 1,000 points are awarded by a market-friendly administration, a subordinate ally in the United States, who paid everything and more to the vultures, went into debt, released the foreign exchange market and totally deregulated entry and exit of capital management of economic policy at the International Monetary Fund.

The two contexts are diametrically opposed, but Wall Street's response has finally been the same: to flee Argentine equities and bonds.

When simplistic interpretations are clarified, such as the publication of the CFK book or the political risk of a defeat of the ruling party, and that the financial world begins to be badyzed with its own rules, which are nothing of the kind. 39 other than obtaining quick and generous speculative profits, it facilitates the understanding of situations that disorient many, such as the reasons for the current debacle.

It is not the political centrality that CFK preserves despite the judicial harbadment of which it and its family are victims, but the failure of Macri, both in terms of economic management and the maintenance of financial security. a political alliance, which explains what is called the market. . This is why the world of finance is pushing for Macri to be moved by Governor Maria Eugenia Vidal as a presidential candidate of the ruling party. Without other political considerations, such as the fate of Cambiemos in the province of Buenos Aires without the highest electoral figure, and without being sure that it is the most voted in the presidency, what do the critters of Wall Street need is another "story" to re-bet on Argentine badets. Macri has already disappointed them.

The alliance macrismo-radicalism is therefore trapped. Making decisions based on the mood of financiers is absurd in political terms. But, as in the Macri government, hegemony is exercised by international finance. The questioning of the latter results in the current decline in share prices and government securities. That is, by either way, Macri's political project is blocked.