Behind the vertigo of the runoff

2023-10-28 23:41:00

There was no respite. They were still counting votes and assigning disputed seats when vertigo took over the scene once more, like the previous week in the markets. On Friday, the dollar counted with settlement reached $1,100 in a context of full-throttle intervention to avoid a greater overflow that implied the virtual closure of operations in the segment blue.

All that energy seemed to be diluted when, on Monday, there was a virtual segmentation of the exchange market that thus converged to the value that the former future minister Carlos Malcomian had predicted: $500. Proof that the questioned exchange rate delay was not an electoral battlehorse once morest the presidential race of the minister-candidate but a reality: when reserves are empty, inputs are missing and import orders accumulate, there is no story that is worth it. The decompression also assumed a risk: that it would happen like in August, when a devaluation of “only” 22% was passed on to prices during the following four weeks. In just 40 days, the competitive “advantage” of the exchange rate jump returned to zero with the resurgence of inflation. Already with a CPI traveling as a floor at 10% monthly, any movement that fueled devaluation expectations might light the fuse of hyperinflation.

Economy with feet of clay

The subsequent decline of the financial dollars It removed a momentary concern, also helped by the political cauldron that at full speed sucks up all the energies of public discussion. A small favor for the Government that can disguise the imbalances that thus find extra time to begin moving through a resolution. In addition to the threat of a currency run, the ranking of ghosts that hover over the precarious tranquility are the renewal of internal debt (every month the Banco Central must revalidate its status as a solvent debtor), the establishment of agreed prices for a kind of truce until the end of the year and the normal supply of some goods whose prices are far from being classified as “fair.” What was happening in the week with the fuels, clearly at prices very decoupled from the historical average (between US$0.90 and US$1 for a liter of super gasoline), it seemed that the sustainability agreement expired on October 22. Now it will have to be renewed for at least four more weeks because leaving the engines off in a country like Argentina is bad news for the candidate who aspires to plebiscite his economic policy. It might be an advance of the imbalances that, if not corrected, the market might do so in the most brutal way possible.

Exchange market. Photo: Shutterstock Agency

The general reset of the economy is an open secret. On the part of the coalition that proclaims change and that strives not to jump into the void, the consensus that exists is that the model was sold out. Some may blame the previous administration, the climatic hazard, the upheaval on the international scene, the lack of consensus or the intrinsic evil of the stars. But a presidency that begins with an index of poverty of regarding 42%, inflation of 180% annually, an accumulated debt with importers that might be equivalent to 50% of total annual purchases and a fiscal deficit above 5% of GDP cannot aspire to anything other than stabilizing the economy. However, below these bad grades, there are others that are visible only when a non-existent good indicates that the market has stopped functioning harmoniously: the great distortion of relative prices. The higher the inflation, the more likely it is that there will be winners and losers among the different productive and working sectors. Virtually no one matches the general index and bargaining power or exogenous factors place the variables in red or blue numbers. This enhances the output of a inflationary jump as a way to correct these deviations accumulated in almost five years of devaluations, controls and discretionary segmentations. A threat that, for now, is only sublimated by the enormous political struggle… to grab the real hot potato that the Argentine economy has become. A paradox, but as Blas Pascal maintained, “the heart has reasons that reason does not understand.”

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#vertigo #runoff

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