Orlando Ferreres: “The exchange rate is behind by just over 40 percent”

“The first impression of Sergio Massa’s announcements as Minister of Economy has been generally very good, although it was an announcement of measures to be executed, not yet carried out”

The appointment of a “political” Minister of Economy, like Sergio Massa, aims to clear up the disagreements that had been observed in the matter in the government coalition, and to begin to face the always-promised “reordering” of public finances, and so many times postponed, even after the agreement that was signed with the IMF on March 25.

Hence the expectations generated by his replacement by the fleeting minister Silvina Batakis, although since he took office only the guidelines and objectives are known, but not the main instruments of economic policy, particularly in exchange, financial, tax, liberalization of the economy and income, which are expected to be explained in the presentation of the 2023 Budget, and the updating of the original projections for the current year.

The first reaction of the markets was partially positive because it cleared some risk of an imminent default of the public debt, but it did not manage to reverse the daily “drip” of the BCRA’s foreign exchange reserves, beyond the drop caused by the payment of maturities with the IMF with the use of the SDRs that the organism rotates quarterly since the end of last March for that purpose.

“These are measures to be executed, not yet carried out”

Infobae attended the experience of orlando ferreresis Deputy Minister of Economy, director of the consulting firm of the same name and a permanent reference for ministers and companies, analyzed in an interview the current scenario and his expectations for the short term.

— What is your first reading of the measures taken by Sergio Massa as Minister of Economy?

— The first impression of Sergio Massa’s announcements as Minister of the Economy has generally been very good, although it was about measures to be carried out, not yet carried out. The number of measures was numerous, divided into four chapters, each with four measures to be adopted in each of them, the main one was to lower the fiscal deficit to 2.5% of GDP, in coordination with the agreement with the Fund International Monetary Fund (IMF) signed on March 25 last.

Now he also approached the Central Bank to consider that the lack of reserves in dollars is important and that he has already met with grain exporters to calculate that in 60 days they will liquidate USD 5,000 million. In addition, it will meet with different international banks to obtain loans and also debt guaranteed by the Central Bank from National Treasury Bonds and also with agreements with Arab countries.

"In the national economy there is an excess of pesos and a very notorious lack of dollars"
“In the national economy there is an excess of pesos and a very notorious lack of dollars”

— And what about your team of closest collaborators?

— Sergio Massa’s team is important, but it is expected to be completed with the appointment of the deputy minister, who should be an economist, since he is a lawyer. This position is key, since it is he who has to refer to the different measures adopted by the minister, and know the execution times of the different decisions.

— What are the main weaknesses you see in the national economy?

— In the national economy there is an excess of pesos and a very notorious lack of dollars. That is why the minister stressed that there will be no Temporary Advances from the BCRA to the Treasury and that dollars will be obtained without making any devaluation of the official dollar, which is difficult to achieve according to the following graph:

— And the threats?

— In the previous graph you can see the PTE (Equilibrium Theoretical Parity) with little blue marks that in July 2022 was $200 per dollar, while the serious dollar is $122. This means that according to that series is behind in little more than 40% with respect to the countries to which we export or commercialize. Without this necessary adjustment, since free dollars are between $280 and 293 per dollar, it is difficult for our creditors to be able to lend us if we do not update the price of the foreign currency. Also, people are worried about the increase in poverty, due to the fall in real wages, while consumption is increasing, product of a certain excess of pesos that the Argentine economy has. The drop in it is 22% from January 2018 to now, and it will continue like this in 2023, product of which the productivity of the worker has decreased approximately in that proportion. We can see this in the following graph:

— How is it that the economy shows increases in consumption, despite such a drop in real wages?

— It is that part of the available pesos is being allocated to the purchase of dollars or any other good that may represent them, including durable consumer goods, which are like dollars from the point of view of the holder of financial resources.

“A part of the available pesos is being used to buy dollars or any other good that can represent them”

— Will the biggest challenge be reaching September 2022, when gas import needs are expected to subside and Central Bank reserves may stop falling?

— At this moment the BCRA is suffering from the importation of energy at very important figures that, in addition to arriving from Bolivia by gas pipeline, come in liquefied gas by ship and the price, as a result of the Russian invasion of Ukraine, has grown a lot, almost to the equivalent USD 40 per million BTU (British Thermal Units), when last year’s price was 4/5 dollars per million BTU. These energy imports will drop drastically at the end of winterby September 2022.

— How do you see the monetary policy of the Central Bank?

— The Leliq cases and other important problems remain to be resolved, which will surely give the new minister a hard time, but he will reach the end of his term in December 2023.

"For the rest of the year we now expect inflation, which although it will tame a little, it will still reach 90 percent"
“For the rest of the year we now expect inflation, which, although it will tame a bit, will still reach 90 percent”

— What can be expected for the rest of the year in terms of inflation, growth and the exchange rate?

Inflation will surely not loosen in August, since there have been various corrections in relative prices, including electricity, gas and water rates and many adjustments such as the salaries of building managers among others. For the rest of the year we now expect inflation, which, although it will tame a bit, will still reach 90% in 2022 compared to December 2021. As for growth, the economy is quite stagnant, although it would grow at 3.5% due to the “drag effect” of the average increase of 10.3% obtained the previous year. and about the exchange rate, we will see if the Government is going to correct them in the coming months or tries to reach December 2023 with the monthly corrections that it has been making lately.

“A final thought?”

—The situation of the Argentine economy is quite difficult, so We will have to be attentive to the maneuvers that Minister Sergio Massa wishes to impose on the national economy.


What the first reports from Wall Street banks say about Massa’s measures
The Central Bank regulated the measures to stimulate the liquidation of foreign exchange from exporters
The Government expects to save $500,000 million in subsidies due to the new consumption cap and rules out changes in the savings dollar

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