The stagnation of economic activity together with inflation, which implies a constant increase in prices, is what generates a phenomenon called stagflation. This concept is often used in turn to determine a situation in which an economy grows at a low rate and with an index of price increases above the target set by the Central Bank. The Argentine case is more serious, anticipating zero growth and very high inflation. With a stagnant economy and an increase in prices above expectations, the adjustment is usually made via employment; in fact, a fall in activity is also observed.
It is the worst scenario for the national economy, because the currency crisis does not benefit to improve the current perspective. It is that that accelerated the remarcaciones of prices, after the exchange rate, and the collapse of the activity. Several economists of the country, estimate that it will conclude 2018 with an inflation of between 42% and 45% per cent, when affirming that four months of very high inflation are coming. In the first eight months of this year it has accumulated 24.3%, according to official data from Indec. In turn, private studies estimated that inflation in September would be around 6% or. This, in turn, moves away from that goal of 32% for the entire year scheduled with the IMF in the first agreement reached in June.
This week it was known that inflation in August was the highest of the year, reaching 3.9% according to the Indec. And if August was bad, September is expected to be worse. Private consultants like Ecolatina expect an inflation floor of 6% this month. Therefore, inflation in 2018 is set to be the highest in the last fifteen years and it is estimated that it could even exceed the record of the 2001 crisis. The continuous depreciation of the peso should be added – so far this year it averages 50% -, a Gross Domestic Product (GDP) below the zero line and the growing social unrest.
Since the management of Mauricio Macri, this battle for inflation has been lost this year. In this way, the Argentines went through several storms during the two and a half years of the government of Cambiemos, which assumed optimism in a better future, which now transformed into fear of what is to come. President Macri is paying the price for his mistakes, but also for his unfulfilled promises. Because not only the promised rain of investments never arrived, but the worst of all is that inflation did not fall but the country's economy enters the already mentioned stage of stagflation. The issue is closely followed at the local level and with concern even outside the country, to the point that due to the lack of a solution to the inflation problem, the possibility of the return of convertibility in the country was considered. It was formally admitted that from the Treasury of the United States such a possibility was introduced to curb uncontrollable inflation and that this was raised in contact with the Casa Rosada.
In turn, Larry Kudlow, director of the National Economic Council of the White House, said in an interview with Fox News that perhaps the solution to the dilemma of the Argentines is to re-tie the peso to the dollar, as in the 90s, and not emit a single more weight without a dollar of support. And he assured that the US Treasury knows that this is the solution and is working on that. The issue was subsequently rejected in Argentina, on the grounds that it could never be approved by Congress.
In the midst of the storm
To change still some actors of the past they reditÃ ³ in favor, like the case of this week, that in the middle of the bogged renegotiation with the International Monetary Fund appeared in scene Guillermo Moreno signing an order. From the Justicialist Party a letter was sent to Christine Lagarde to stop the extra disbursements requested by the Argentine government. It is not the order itself, but who claimed such a measure. It is known that Moreno could be the perfect enemy for Cambiemos, because of the strong rejection in the society that always generated the figure of the former Secretary of Commerce Kirchner.
The truth is that Moreno, in his capacity as president of the Economic Commission of the Justicialist Party, expressed concern to the head of the agency that more funds be released to Argentina. Specifically, he rejected the possibility that the disbursements of the stand-by agreement for the years 2020 and 2021 will be advanced to 2019. What generated political noise was not the main signatory, but the inclusion of the well-known and respected economist Guillermo Nielsen, to whom He proposed to make contact with the members of the IMF and reflect on the proposals made. The former massist candidate and respected economist in the international markets clarified that his intervention would not be to operate against the country, but that the agreement with the IMF would be prolonged beyond the current administration of this government.
Beyond the explanation of Nielsen, it is known that any sneeze can make the delicate financial state of the country even worse, so nothing can be taken lightly. To mark more tension in the market and while the dollar closed the week close to 41 pesos, finally tomorrow will not reach the 3,000 million dollars corresponding to the second installment of the IMF loan. It is that the body in charge of Christine Lagarde stopped the disbursement of September until the end of the renegotiation of the new agreement, which has not yet a date.
The Macri government had asked the Fund for an additional disbursement for this year of 12,900 million dollars and to extend the credit: instead of 50,000, that is 65,000 million. Meanwhile, expirations continue to operate. For example, this Tuesday will see a new expiration of Lebacs for 403,000 million pesos, which could boost the pressure on the exchange rate to continue the disarmament strategy announced in August. In this way, the supercharges of concern in the Argentine economy continue.
With the governors
This week, at least 19 governors opposed to the government gave political backing to accompany the national budget 2019 with zero deficit. It represented the gesture expected by the government of Cambiemos, although the fine print represents a negotiation process that was extended during the week. It is that it implies several important adjustments and transfers of responsibilities to the provinces. It had begun with the withdrawal of the Soya Fund, which some districts are still claiming, and the transfer of subsidies to transport was added, and the subsidized energy was removed from the lower income sectors. Each province must resolve how to face these commitments.
It is expected that in the Budget Law that would be entered tomorrow, the Nation contemplates exempting the provinces from complying with the fiscal consensus and could enable the increase of Gross Income and Seals. It would be the way to compensate the provinces for these transfers of responsibilities, such as taking charge of public transport, soy funds and energy subsidies; in addition, the provinces would hold the check tax. All this will be known if it remains firm once the project of Calculation of Resources and Expenses for the next year has been entered.
The position of Missions
As they ended up doing other districts in the country, Misiones was the first province to define support for the national budget. This was recognized from the Nation, because with it is guaranteed the vote of the missionary legislators in an area where Cambiemos does not have enough own votes. From the government led by Hugo Passalacqua it was explained that being opposition was decided to accompany before the delicate situation that crosses the country and in order to cushion the effect of the current crisis. For this reason, also from the management some plans are maintained, such as the Now Pan, the Now Gas and the Now Gondolas, to alleviate a little the pockets of the missionaries.
The medium of economic and political storm, Cambiemos launched a new timbreo in the country, as was also done in Posadas. The excuse was to know what they think and feel about the country, but the real reason is that the electoral machinery of Cambiemos was set in motion again. To the front is Marcos Peña, who, being displaced from some economic decisions of the government, now carries out the activity he knows best: to lead a campaign. It remains to be asked if the timbre sound is appropriate when all the alarms are on in the country. Proof of this was the great protest developed throughout the country by trade unions and social organizations, which manifested themselves in a context of growing social unrest due to the economic crisis and the spending cuts to which the Argentine government committed itself to the IMF. According to the latest official figures, about 30% of the Argentine population is poor, but analysts estimate that the figure will increase at the end of the year when the new value of the dollar is transferred to prices and the recession increases.
A little clarity
In order to shed some light on the complex economic and political situation in the country, the Economic Confederation of Missions and the Argentine Chamber of Commerce and Services, invited to speak this week in Posadas to the former president of Banco Nación Carlos Melconian and Eduardo Fidanza consultant. The latter recalled that Macri went from an almost assured re-election to a currency crisis and a situation of difficult governance. Therefore, it required a more responsible policy to the government and define whether it will continue to speak only to the market or if it also includes people, showing a high level of disillusionment where by far the economic problem is in the first place. One more example of this was the massive turnout to listen to these speakers.
Economic concern is a recurring theme in recent months and remains in the first place, according to the latest survey by Gustavo Córdoba y Asociados.
According to Fidanza, there is a growing rejection of rate increases, when in the first months of Macri's administration they silently accompanied and supported these increases, thinking that it would soon change, which did not happen until now.
Melconian took care to detail how the country is. When talking about the agreement with the IMF, he recalled that the goals were not met since the first signed agreement, and in the middle, Argentina returned for more funds. Melconian claims to be a friend of Macri, but as a technician he does not stop harshly marking the mistakes. He affirmed that with this fiscal pressure and current spending, the economy ended up being put to politics. He added that what he had to do from the first minute Let's change, he is trying to do now after having intervened with millions of pesos – which is the same as having squandered resources – to try to stop the dollar without success. Now, according to the economist, there is a recession scenario and the only possible way out is the good sales that the field can make.
Macri and Cristina, matched in the survey
Fidanza said that in the current economic scenario the image of Macri had fallen so much that at present it resembles that of the former president Cristina Kirchner. He clarified that an economic recovery could favor Macri, although he should go out to reconquer the disillusioned. In the case of Cristina, she is in a situation of fragility due to the corruption scandals reported in recent times. For that reason, he considered that the most probable thing is that Peronism seeks another candidate who tries to reach the Casa Rosada next year.
Similar conclusions were observed in the political communication marathon carried out last Thursday and Friday in the city of Córdoba. The political conclusions of the top consultants were followed by political conclusions, and there was an overwhelming coincidence in emphasizing that the hard core of macrismo has been reduced, like that of Kirchnerism. As it is known, in second laps majorities are needed that are lent to succeed. Today's photo shows great discontent in search of a hopeful election offer that is not yet present.