Who pays the bill for the country risk increase: Macri or Cristina? – 22/12/2018

For the most experienced traders on the market, it was not a surprise: in recent days, the biggest sellers of national bonds were Argentines.

This trend comes after weeks of weakening of the weakness of these papers, attributable to sales of large funds from abroad, in the hope that Cristina Kirchner I could win the elections. What, in other words, would be that Mauricio Macri I could lose them.

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The increase in the country's risk rate to 800 points (means that Argentina should pay 8 points more than US bonds to obtain funds) was crowned after the US Federal Reserve raised the benchmark rate by a quarter of a point, or between 2.25 and 2.50% per annum.

The increase in the US rate implies an increase "The floor" of the financial cost for the world, especially for emerging countries and, in this case, for Argentina, whose country risk has risen sharply in recent weeks.

Originally, the country risk, which rose from 600 to 700 points, met the eyes of bankers, operators and investors to a security issue. political expectation.

They read that the government's electoral strategy, supported by the opinion of Jaime Durán Barba The main political adviser to the president would be based on the confrontation with the former president and on financial matters, this would result in the fear raised by Cristina Kirchner in the financial world.

For finance, the triumph of the former president would repudiate the IMF, unilaterally reschedule debt, the return to capital controls and the deepening of its policy of struggle with companies that are not related to it.

The logic of deepening the political crack was followed by the increase in the "risk Cristina", which had as correlates a message from the former president more favorable to some businessmen. but retaining the position of the former minister. Axel Kicilloff renegotiate with the IMF in a position of strength. What will alternative financing be?

Like a dog biting its tail: Cristina's fear favors the rise of the country, which increases doubts about the possibilities of the government of reactivate the economy although he does not have the opportunity to go to the markets to obtain funds.

That a bond that expires after 2019 comes to offerBetween 12% and 14% per annum in dollars is the most obvious economic indicator that is relatively cheap but it also reflects the uncertainty that precedes the election year and occurs at some point in time.

There has been an improvement in the official mood in the heat of calm on the foreign exchange market over the past four weeks. In November, for example, ticket purchases by individuals fell sharply (they were USD 408 million, the lowest since 2015).

The stabilization of exchange rates was probably the best economic news of a year in which the devaluation had collapsed.

Manufacturing and construction industries are registered 40/50% drop in the main posts.

The the real wage would end with a 10% reduction and the sale of food products, with losses of about 5% in quantity.

Faced with this scenario, Casa Rosada has prepared a table that anticipates growth, from now on, 1% per month of payroll this will be added to December's 7.8% retirements and a deep-peer policy that has two strong players in opposite positions.

The Ministry of Production of Dante Sica He has already said that he hopes that wage increases are 23% but, from the economy, those close to Nicolás Dujovne they let it be known that the minister I would be happy if inflation dropped to 28-30% next year.

The IMF said last week that it hoped to follow the policy of rising rates and moderating wage increases, but all those who will participate in the elections do not think the same.

In the province of Buenos Aires, for example, there is talk of the need for loosen the hardness of the salary and move forward without too much hesitation in the application of the the "trigger clause" update state salaries, including teachers, according to inflation.

The idea that in 2019 we had put more money in people's pockets it is clear that most of those who become key candidates of the ruling party; This is why the climate change of Casa Rosada stands out.

Once again in Argentina, a certain calm of exchange frees the fantasies of the ruling parties and, even more so this year, after a race that has put a lot of political aspirations on the precipice.

The end of the year is quieter, but the steep rise in country risk adds tension to Cristina Kirchner 's possible bid and economic costs for Mauricio Macri' s management. Moreover, it challenges the electoral theory of melee confrontation.