Weight Destruction and Planning Limitations Savings in dollars are lost and the value of the currency falls. What’s going on?

The distance between the development of monetary and exchange variables – which the government proudly displays before the IMF with an air of “mission accomplished” – and the distance between the real economy, which is primarily a matter of production, consumption and income distribution. Does it. The latter, unlike the former, reflects ineffective position Which goes so deep that inflation puts it beyond the reach of those who live on salaries.

But a strange phenomenon comes out: among them some individuals and some companies are also signing up day by day End up at least some part of your savings in dollars, the pesos received in exchange, to be able to pay your bills or your expenses. The “normal” income of companies or households is “no longer enough” to cover their normal budget, so they “spend” their savings in dollars to pay bills they cannot afford to pay ( Credit card maturity or payment) child’s school tuition in some cases, or salary in other cases).

Some are not: those persons and companies This has caused the blue dollar and financial markets to retreat by more than 10 and even 15 percent. (cash with MEP and liquid) in the last 30 days, while retail inflation was around 15/20 per cent monthly.

The “gap” between the official dollar and the “fiscal” dollar declined from more than 50 percent to less than 30 percent in a month. “Good news” for the ambitions of the Economy Minister, Luis Caputo and his team to “stabilize” financial variables. A central bank that accumulates reserves through net purchases of foreign currency in the wholesale exchange market, a cash surplus in the public accounts in January and a positive balance in foreign exchange between exports and imports complete the picture that the government wants of its success. Celebrated as. Its policy. Economical.

But that is only a partial view.

For example, behind the “twin surplus” are hidden the consequences of a strong recession. Last year, exports had sunk due to drought, which are showing signs of improvement this year. But now the dollar is dry import. The Central Bank imposed an overall limit on the sale of dollars to pay for purchases of inputs and with this, on the one hand, it achieved a reduction in purchases abroad (which is the main explanation for the trade surplus); And on the other hand, deepen the internal recession. The decline in demand, which reduces sales, is now accompanied by a decline or outright paralysis of production, depending on the commodity concerned.

Nor is it conceivable that the interruption in the transfer of items assigned by the Budget, as happened in January, can be extended indefinitely. Besides, Tax collections have started declining (Which was increasing till January due to the impact of recession). In industrial areas affected by the recession, as well as in provinces and various regions affected by spending cuts, visible expressions of protest and various forms of rejection or organization of resistance have begun to be seen. Clearly, range of adjustment They are not of a technical nature (inconsistencies of the model, as some define it) but of a political nature: How far can the government go? With an openly aggressive program in areas that are beginning to respond.

financial tips

At the financial level, without disclosing it publicly, Government gains a key ally in its strategy: Bank, Let’s remember that even before the change of government, there was open discussion about how to handle the “Lelic bomb”, a spectacular loan of banks in pesos by the Central Bank, which was supposed to explode at some point. Now, No one talks about Lelik anymore. What happened?

Luis Caputo used the best of his skills in setting up financial businesses in the private sector – he had a long history in this work – to make an attractive and very profitable offer to the banks owned by Lalique. The first step was the exchange of those medium and long-term debt securities (between three and 36 months) issued by the Central Bank for a “passive repo” of the same entity in 24 or 48 hours. It was amazing to see how, in just a few weeks, several billions of pesos left Lilix balances and became inactive.

Now, the second phase is underway: converting these passive repos from BCRAs to subscription of Treasury debt securities, which are largely (95 per cent in the last tender) taken up by banks.

Banks “cancel” their positions in repos (when they expire they collect them at the Central Bank, they do not renew them) and place that liquid money in debt securities of the Ministry of Economy. . The treasury is in debt and the Central Bank is in debt to the same creditor: Bank, But there is another element: In the tender on February 16, the Treasury provided debt securities for 4.9 trillion pesos, while it had maturities of only 1.9 trillion. The Economy Ministry itself explained what it did with the difference.

“The financing received above maturity will be used to repurchase AL35 sovereign bonds in the BCRA portfolio for approximately 30% of the monetary base.” That is, three billion pesos on a monetary basis of 10.1 billion. It is a treasury debt security denominated in dollars, but it is traded in pesos in the local market. When you buy it back, the Treasury pays the BCRA in pesos, which returns the title, thus canceling the debt.

i.e, The treasury becomes excessively indebted to return money to the Central BankClearing out BCRA’s accounts (for final dollarization?) but also, creating a “Treasury Bond Bomb”, The Treasury (Ministry of Economy) will continue to pay high interest rates to banks, and will need to compensate for this with lower fiscal spending, so that fiscal deficits do not arise again.

Again, the limit is not technical but political. How deep can the adjustment continue?

One final component element of this financial maze: Bopriyal, Private commercial debt offset bonds, as they were called, eventually became attractive to larger companies. As? Companies with loans for imports can buy dollars in pesos at the official price, but they will receive them only on the maturity date of the bonds and with additional income. Thus it becomes a kind of “Free Exchange Insurance” And it is not necessarily tied to such a long maturity.

For official policy, Boprial is another efficient vacuum cleaner for drying the weight areaIn this case those who were in power of the big companies, and Generates loans in dollars from the Central Bank Remuneration to convert liabilities into pesos.

Savings and Pay in Blender

Liquidation of assets in pesosWhether salary credits, bank deposits, transfers receivable from the state, or loans in local currency, It will be just as violent as inflation will be high and prolonged.

, which has already accumulated an average of 20 percent in three months. Economic conduct, in turn, is generating rapid absorption of pesos to reduce the monetary base. The private sector is left with fewer pesos and no small part of the middle class is forced to sell part of its assets for dollars to pay for current expenses.

The monetary system is changing violently, although this is not so clearly considered. The shock is going downwards, because at the same time this process promoted by the government is deepening the recession and could lead to economic collapse.

It’s no coincidence that Miley describes March and April as the “hardest months” of the process, although that’s half the truth. They will be the hardest due to the combination of ineffective effects, but do not necessarily mean starting the recovery cycle after that. The middle class and companies liquidating their dollars to meet current expenses is like a symbol of that final state or limit point: What will they do when they see they are running out?

Everything will depend on how the regions facing this crisis behave politically. And how the government responds, because the success or failure of the economic program underway in those months may also be at stake.