The new Minister of Economy faces an emergency and various urgencies. The measures announced by Serge Massa and the next ones that will be known these days have a initial requirementindispensable for any political and economic evaluation of this experience: obtain dollars in quantity for the Central Bank.
Without adding reservations to the exhausted coffers of the monetary entity, the communication strategy, with many signs of the beginning of a new stage in the government coalition, which these days was effective in the essential construction of renewed economic and social expectationsit will remain as another failed attempt to contain an exchange-financial crisis that would end up affecting the dynamics of economic and labor activity.
The emergency that Massa wants to attend to, according to the various initiatives spread in the micro-cinema of the Palacio de Hacienda, is then to obtain a sufficient amount of dollars to considerably increase the reserves of the Central Bank. The new economic team knows that without this condition it is impossible to deal with emergencies, which in short are the substantial drop in the inflation rate from socially and politically intolerable levels and the consequent recomposition of the income of workers and retirees.
The sequence of intervention of the economic management was exposed as follows in Minister Massa’s presentation:
1. Direct and immediate measures to increase the stock of dollars in the Central Bank.
two. With the recovery of a minimum level of available reserves, the aspiration is to reassure the exchange market with quotes of the stock dollars (counted with liqui and MEP) that point to bridge the gap with respect to the official exchange rate.
3. The bet on the stabilization of the exchange market is one of the main anti-inflationary measures.
Four. However, in addition to the seduction for the liquidation of dollars from exports and the proposal to obtain foreign currency through financial channels from international banks and multilateral organizations, the bi-monetary Argentine economy demands, in situations of foreign exchange suffocation, reduce the fiscal deficitevaluates Massa’s team.
5. The current imbalance in public accounts is not pronounced for other economies, but without fluid access to financing (foreign and local) is disruptive to the foreign exchange market.
6. Here appears the link, for the economic team led by Massa, of the fiscal issue and the search for exchange stability by adding dollars. The owners of the dollars (exporters and the financial system, in addition to the IMF) demand the reduction of the deficit to deliver a few million. This is how Massa’s ratification of the 2.5 percent fiscal deficit target agreed with the Fund for this year, with the specific measures to achieve it.
To this delicate economic situation, which implies providing concessions to privileged sectors for being net exporters and that, at the same time, require tax restrictionswas reached by the constant loss of reserves, exacerbated in these months by energy imports at prices substantially higher than those of last year, due to the armed conflict in Ukraine and the economic sanctions on Russia.
Massa’s mission to deal with the economic emergency, which is eminently exchange-financial, also has the objective of attending to the fragile political-institutional framework by the accelerated deterioration in which the government coalition had entered.
Adding dollars in quantity to the Central Bank not only responds to the need for exchange stability and, therefore, tries to deploy a strategy to reduce inflation and improve the income of the popular sectors, but also guarantee that the government of the Front of All can complete its mandate in December 2023 and then open a electoral window of opportunity for the ruling party in the next elections.