Reports
Inflación tranquila, pero hasta ahí. En los últimos días los precios se tranquilizaron respecto de las primeras semanas del mes. Aun así, la canasta de alimentos nos está dando un poco más alta que a algunos de los colegas que miden. Igual el número de julio no va a ser malo porque los precios regulados no van a aportar, con lo cual también hay chances de que la inflación núcleo termine siendo más alta que el aumento del IPC. Probablemente esté entre 4 y 5% en línea con los últimos meses, pero no llegue al 3.7% que mostró el Banco Central en el powerpoint que compartió con inversores.
The government is focused on turning off the money-issuance faucets. As for that one corresponding to the government financing, there is not any opposition, quite the opposite. The IMF and the entire community of economists and businessmen celebrate that the government has a surplus and that the faucet is not only closed but practically prohibited.
Se resuelven dos de tres. Las “Lefis” (instrumentos del tesoro que reemplazan a los pases pasivos) debutan el próximo lunes y hoy debería quedar resuelto el tema de los puts (opciones de venta) que tienen los bancos sobre bonos soberanos contra el Banco Central. Para nosotros estos problemas eran menos graves que para el gobierno, pero está bien que se dejen a un lado. La tercera condición para levantar el cepo es que la inflación llegue a 2% mensual. Esperamos que las autoridades no sean religiosas con esta condición porque francamente “no la vemos”. Seguimos pensando que levantar el cepo tiene más beneficios que costos.
1st assumption. The exchange rate couldn’t depreciate because the Central Bank had dried up pesos from the market (with the Bopreals and by not lending to the Treasury). The truth is that if they had really dried up the market, the price of pesos (the interest rate) would have gone through the roof. But the opposite happened, the interest rate dropped a lot. Where the miscalculation lies: there are instruments in pesos such as fixed-term deposits, Treasury bonds, Central Bank debt or simply taking out loans, which could convert to dollars if confidence was lost. It is not only the monetary base that matters, what matters are the financial assets with which one can make a change of portfolio and run against the peso when expectations change.
La inflación de julio no empezó tan bien. Es claro que junio va a darle sonrisas al gobierno. Con los ponderadores de la Nación y usando precios de la Ciudad la inflación podría ser de apenas 4.5% en junio. Pero en la primera semana de julio la inflación del consumo masivo subió a 1.6%. A esto se suma un mes estacionalmente más difícil y el tema climático (el extremo frío en buena parte del país) seguramente dejará una marca en los precios de julio. Seguimos pensando que la inflación del año va a estar entre 155 y 160%, pero eso tiene implícito una salida del cepo que genera un salto manejable de la inflación en el primer mes y algo en el segundo. Si no hubiera salida del cepo en 2024, la inflación puede estar más en torno de 140%.
It gives the impression that the government does not plan to remove the exchange restrictions in the short term. It also seems less likely that there will be a shock stabilization plan such as the Austral or Convertibility plan. We think that exchange rate unification can occur in December. We estimate that the crawling peg will continue for the next months at 2%. By the end of the year, we see a dollar of 1,560 pesos with the unified market. The alternative we see to this scenario is that if the BCRA fails to accumulate reserves, it will be forced to let the exchange rate float before December.
Everyone is waiting for the government to give some signal regarding the removal of FX restrictions. Without a doubt, that is the macroeconomic question of the hour. The uncertainty of the market hides the fact that President Javier Milei finally decided to appoint Federico Sturzenegger as Minister of Deregulation and Transformation of the State. This is something that was always in Milei’s mind, but for some reason, it took him more than six months to do it.
La sangre no llega al río. En Econviews no vemos todo este nerviosismo de mercado como una crisis ni nada parecido. Nuestra filosofía siempre fue: “ni antes estaba todo tan bien, ni ahora está todo tan mal”. Es claro que hay un problema con el tipo de cambio, pero no es un tema que deba resolverse esta semana o la otra. Javier Milei es un gran comunicador, pero probablemente se apresuró el viernes a tirar la fase 2 en su entrevista y eso generó un apuro de parte de las autoridades que no cayó bien. De hecho, hay detalles que aún no se conocen. Pero nuestro análisis es que el dólar se estabiliza en niveles de brecha en torno al 50% y el riesgo país debajo de 1,500, pero queda el mercado en guardia a esperar un camino hacia la salida del cepo.
On the surface, last week ended very well for Milei’s government. After six tough months, Congress approved “Ley Bases” reform bill and the fiscal package, including the most contentious issues such as the special investment regime, the increase in income tax, the increase in the minimum rate for personal asset taxes and the moratorium and tax amnesty, which were less controversial. In addition, the high-frequency data on inflation continues to show a lot of calm in supermarkets, so that June’s CPI print, although probably higher than May’s, seems relatively calm.
Finally, Milei is getting the approval of the first laws: the “Ley Bases” reform bill, and the fiscal package. This is an important political victory, and it indicates that when push comes to shove, he is willing to compromise. Much of the merit goes to his new Chief of Cabinet, Guillermo Francos, who proved to be a shrewd and tireless negotiator, though it is clear that Milei supported him throughout this process.
Puede dar menos que 6. Nuestro pronóstico de inflación para junio es de 6%. Creemos que el riesgo de ese número es mayormente hacia la baja. Si bien las tarifas y el combustible aportan mucho más que en mayo, los precios en los supermercados vienen muy tranquilos. El hecho de que la actividad económica se recupere muy lentamente está ayudando a que los márgenes sigan bajando.
- midweek, weekly
External Shocks and the FX Spread Compromise International Reserves
The fifth consecutive fiscal surplus and inflation below 5% are important points in favor of the government. In addition, the activity starts a recovery path. What is still under discussion is whether the exchange rate is appreciated. It is a question that has a thousand possible answers many of them with consistent justifications.
The week ended on a positive note. Inflation was the lowest in 24 months and beyond the rise in utilities, the core CPI at 3.7% was a goal from the middle of the field. The OK from the IMF board was a given, but it is always good to confirm it. And the approval of the “Ley Bases” reform bill is the crowning of a 6-month process in which the project was reduced by 60% and where many things that the government wanted to do were left along the way. The government could not bend the will of the lovers of the status quo (politicians, businessmen and unions) on some issues. Surprisingly, it could not restore income tax for the wealthiest workers, something that lacks common sense and can generate fiscal problems.
De la motosierra al bisturí. Con ley Bases y Paquete fiscal hay un panorama más claro, pero no es la panacea. Es claro que el mercado, el gobierno y la sostenibilidad de la situación económica y política descansan en la aprobación (ahora concretada) de estas dos leyes. Pero los problemas que vemos en términos de pocos instrumentos para muchos problemas no se acaban con la victoria política que de todas maneras dejó sabor amargo por la caída de ganancias y en menor medida bienes personales. Queda por ver si con la pérdida de recursos que es no tener ganancias si se avanza con la baja del impuesto PAIS o cómo se reemplaza. La otra gran incógnita es sobre las finanzas provinciales. En la macro, tenemos que ver como plantea el Ministro de Economía la Fase 2 que a nuestro criterio es una fase sin motosierra, pero con bisturí.
In the last two weeks, the financial market has faced one setback after another. The Blue Chip Swap dollar jumped from under 1,100 pesos to over 1,300. The other dollars (MEP and parallel) followed a similar trajectory. We do not see this as concerning. Perhaps more worrying is the fact that sovereign debt prices fell to the point where the country risk climbed back to almost 1,600 points after touching 1,200 or 12 percentage points. Argentine stocks, which had experienced a significant rally, also gave back some of their gains.
Lo del dólar no es grave, pero el gobierno debería dar alguna señal. La suba del MEP y CCL no es un tema que haga descarrilar el plan económico. En Econviews siempre tuvimos un aumento de brecha en los pronósticos, aunque más gradual de lo que terminó sucediendo. El tema es que con el plano político complicado y el gobierno que no termina de decir cómo va a salir del cepo ni da muchas precisiones de cómo va a hacer sostenible la política cambiaria y monetaria, el mercado le cobra esa incertidumbre. Una palabra del gobierno que ayude a tener pistas puede ser clave en esta situación.
Since Milei assumed office, the economy has been moving in one direction: full steam ahead with things improving. Inflation has been steadily falling since its peak in December, the country risk has been dropping from 2,200 points and reached nearly 1,200 a few days ago, and the parallel dollars remained stable. The Central Bank saw no obstacles to lowering the interest rate because, despite having negative real rates, people continued to hold pesos (aided by FX restrictions, of course).
It seems that the government has no plans to remove FX restrictions in the short term. It also seems less likely that there will be a shock stabilization plan such as the Austral or Convertibility plan. We changed the exchange rate unification that we had projected in July to December. For the next few months, we think that the crawling peg will continue at 2% until the harvest ends and then there will be a slight acceleration. By the end of the year, we see a dollar of 1,600 pesos with the unified market. The magnitude of the FX spread will depend on whether the government relaxes the restrictions on the Blue-Chip Swap or not. In the first case it can rise more than in the second.
- weekly
Support for Reforms in the Lower House, More Rate Cuts and Less Subsidy Cuts
The government is approaching critical times as Congress is starting to debate the “Ley de Bases”. The bill includes a fiscal package as well as some structural reforms that should help to improve productivity and increase investment and growth. This is a tone down version from the law that was sent to Congress in February and then withdrawn because the government considered that Congress was softening it too much.
