What are Lacunza's three challenges in economics?

To the new finance minister, Hernán Lacunzait's your turn to get to the place dreamed by any economist, but the opportunity comes at the slightest moment. After a further devaluation, which will surely bring an inflationary correlate, the former government official Maria Eugenia Vidal He will face three battles for the ship to bear fruit in December: contain the dollar, prevent inflation from overturning and close the financial program 2019.

And, to top it all, these three goals must be achieved without neglecting one of the main fights of this government, but the main one: reduce the primary budget deficit as close as possible to 0. To reach the oxygen, the negotiation with the Monetary Fund will be essential. Internationale

The value of the national currency was perhaps the mother of all the ills of the administration Mauricio Macri. Shortly after coming to power, his premier of the economy, Alfonso Prat Gay, had to pay the cost of the dollar stock release and, to top it off, with a rate of exchange that was otherwise late.

But who had to bear the most difficult mega-evaluation costs was Nicolás Dujovne. The first operations began in April 2018, apparently, when many investors decided to leave Argentina because of the implementation of the financial income tax for foreign holders. Beyond this milestone, Dujovne badumed with a dollar at $ 16.33 and left his direction with the currency at $ 58.12.

Although this depreciation of the peso has led to an improvement in trade conditions, as Argentina has managed to reduce the deficit between its exports and the essentials, the balance of payments crisis has led to inflation over the past year. highest of the last 27 years, causing poverty and flight all hopes for GDP growth. In fact The national economy is expected to contract in 2019 and 2020.

Lacunza has to work hard to reduce exchange rate volatility and to do this, it will make the $ 60 million daily auctions that the IMF has allowed the Treasury. Does it seem to you very little? That's it. That is why he must have a coordinated job with the Central Bank and wait for the monetary authority to intervene in times of worry.

It will also depend on the actions of the opposition. Yeah Alberto Fernandez, which for the markets is about to become the next president, again emphasizes that the exchange rate is late, it is very likely that investors decide to flee the peso. If, on the contrary, the Leader of the Opposition returns to convey tranquility, as he did in the middle of this week, saying that there is a balance, there can be peace.

What was the best and worst of the economy during the three years of Macri

This variable is closely related to the one above. Argentina is generally a country that suffers more than any other transfer, ie the transfer to the prices of the devaluation. In fact, the collapse of the currency last week will surely be transferred to prices, mainly for tradable products, ie those that are the most exportable, such as food products.

Each point of inflation is a knife that holds to the extent that hurts the government: poverty. For more sewers and road works in Conurbano, income measures are linked almost linearly to generalized price increases.

One of Lacunza's tasks will be to calm the expectations with regard to inflation. For the rest, it is related to the strategies of the power plant that have little effect: the high rates that freeze the activity and zero growth of the monetary base that withdraws the outstanding pesos.

• Debt and Financial Program

The government's blow to the state within the PSO has had a negative impact on the market and will make it difficult to refinance short-term Treasury debt. In a note published today in Diario Perfil, badysts said that it was very difficult to obtain the 46% renewal needed to close the year 's financial program.

To avoid defaulting, the government must use the reserves of the Central Bank to cancel the bonds. This is why, economists say, the monetary entity was "cautious" and did not show itself more aggressive in curbing the dollar. Once again, the dog is biting its tail. Debt prevents acting on the dollar, the dollar skyrockets and delays inflation.

An expiry path that was presumed feasible to comply with market funding, now, before the official electoral backhand, This sounds worrisome if investors choose not to renew and collect the dollar notes.

"The government's main challenge in the transition is to deal with the short-term obligations that are mainly concentrated there. We must expect a low turnover rate, maybe 25%, and the use of reserves, because I do not think markets will improve by October and will be ready. to renew their activities by 2020, "he told Diario Perfil Leonardo Chialva, from Delphos Investment.

In this context, a consultation report underlined the importance of the fifth revision of the agreement with the IMF, which should take place around 15 September. "On the financial side, approval of US $ 5.4 billion is essential to close this year's financial program.Without this contribution, it should liquidate 30% of the net reserves of the Central Bank to be able to face the expected debt repayments, even renewing 30% of the maturities of Lecap in pesos, "he said. Due to the difficulties of obtaining financing, the rating agencies Fitch and Standard & Poor's have reduced their Argentine debt and may default. Expectations are set regarding the impact on the dollar.

MF / JPA / MC