The celebration did not last long and doubts remained | Market reaction to the adoption of the Basic Law

market euphoria for the approval of the Basic Law last week, it seems there was sporadic. On Thursday, stocks and bonds jumped and the financial dollar fell sharply. But the next day, Argentine companies turned red in New York, the country risk failed to move away from the 1,400 point mark and the blue dollar put pressure again.

He political element This is just one of the things that needs to be taken into account when thinking about the movement of Argentine stock assets, the stability of the exchange rate and the direction in which the economy may be heading. the macro kept accumulating inconsistencies in recent months, and investors have no clear idea of ​​what the path will be to resolve them.

A simple way to think about it is this inflation data for last month, which amounted to 4.2 percent. That’s a lower figure than expected, but it’s still very high for an economy that has seen an extraordinary decline in activity (some sectors, such as construction, fell nearly 40 points and are being compared to the early months of the pandemic).

To this last point it should be added that in June Inflation may accelerate again. On the one hand, due to the influence of utility tariffs, which will add about 1 point to monthly prices. On the other hand, there is inertia that is difficult to overcome with contractionary monetary policy, and an exchange rate anchor that few people trust, mainly when the industry seems to take for granted that crawl 2 percent per month has a ticket.

Questions

The government celebrated the result of the latest retail price index, but in practice it again left Bitter taste. Questions continue to accumulate more than certainties. Anyone who looks at the economy over the past six months will find a shocking collapse in GDP, a jump in unemployment to double digits and an inflation rate that will remain close to 5 percent per month in the coming months. That’s a lot of reasons to think that something is going wrong.

Another axis of macro inconsistencies is related to exchange scheme. Since taking office, the economic team has promised unification of the exchange rate and the introduction of a new scheme based on currency competition. But in practice, he does not find the dollars necessary for this.

There was no private investment Significantly (despite rounds of meetings with US billionaires), international markets appear to be showing little interest in resuming lending to Argentina, and letters from lending institutions such as the Monetary Fund are cooking at a very low heat (with no certainty that this will happen). works).

Last week the government assured that it was making progress in implementing the new law. agreement with the IMF get fresh funds to remove restrictions on the purchase of dollars. There were rumors that she was seeking at least $8 billion from the organization, but most market reports viewed this more as government speculation (and a need to demonstrate the future) than as a concrete option.

The problem is becoming more and more obvious. Economic team does not receive new currencies, inflation is not falling below 4 or 5 percent per month, and the official dollar is moving at a rate of 2. Devaluation expectations are growing, and the foreign exchange gap of about 40 percent appears to be maintained at this level, and not because, in addition to this, thanks to the foreign exchange control.

Miley’s team says no. official process of dollar appreciation and that it does not need exchange controls, but in practice this demonstrates just the opposite. A few days ago, a consulting firm with a long history in the city summed up a very interesting problem. “There is no “chain dependence” or lag in the exchange rate. Eppur si Muove.”