Cristina’s worst enemy will save Massa again

Skilfully, Minister Sergio Massa finished capitalizing on the only announcement that President Alberto Fernández could make during his eventful tour of Asia: the easing by China of the loan (swap) that for years has increased the reserves of the Central Bank (BCRA). According to the Government, of that US$18,000 million loan that had almost no function other than cosmetic, now it will be possible to use –once the high bureaucratic hurdles have been overcome– a little less than US$5,000 million (35,000 million yuan) for interventions in the exchange market. A relief for a BCRA that loses reserves on a daily basis, but hardly a drop of water in a desert that is aggravated by drought and restless with the arrival of summer.

In his eagerness to earn dollars, a few weeks ago Massa took over the government’s relationship with China. As with other international organizations, the head of INDEC, Marco Lavagna, took the post, along with Gustavo Martínez Pandiani, the chancellor in the shadows of the Tigrense. Lavagna takes more and more prominence. Yesterday, Vice Minister Sergio Rubinstein had to come out to deny his resignation and the versions spoke of his replacement by the director of INDEC.

In addition to unlocking the swap for the BCRA, Massa aimed to reactivate the work of the Santa Cruz hydroelectric dams. Weeks before Fernández’s trip, he sent a letter to China’s National Development and Reform Commission with the proposal. The agreement is that China now recognizes the almost US$280 million that Argentina has already paid in advance of the work and that it also disburses another US$200 million.

There is no longer talk of billions together: not only Argentina is satisfied with less, but China is not in a position to give away money today. Xi Jinping’s economy is in full slowdown and it has also been some time since he modified his financing strategy for projects around the world. And it is that many of its partners –such as Russia, Ecuador or Iran– did not turn out to be the best creditors. According to data from the Rhodium Group, between 2020 and 2021 China had to restructure loans around the world for US$52,000 million, a figure more than three times higher than what it had been registering in previous years.

With some exceptions, the investments that China had promised for Argentina have been paralyzed for a long time. Even his foray into the lithium business comes with strikeouts, despite having been announced repeatedly. The Tibet Summit Resources company even had to be summoned by the province of Salta to present its investment plans in the Salar de Los Diablillos to maintain the concession, while the announcement made in May of this year by the then minister Matías Kulfas with the company Ganfeng Lithium to install a lithium battery plant in Jujuy never moved forward.

But in his list of achievements, Massa aspires not only to Chinese dollars, but to show that before Fernández’s term ends the emblematic work of the dams will finally be underway. Of course, the Government admits that the work that was announced more than 14 years ago will only be completed by 2028.

With not much else to get on China’s side, in the Government they have already decided to issue a decree establishing a new soybean dollar next week, with the idea that it will be operational as soon as December begins. At the end of the day, the exchange market does not live from the Chinese mega announcements.

Until yesterday, the negotiation regarding the soybean dollar involved what exchange rate will be offered this time to the field. The Government’s idea was a $215 dollar, with a maximum value of $225. The specific exchange rate for the regional economies will also be announced next week. The relative weight in the trade balance of the latter is negligible, but they help to make up a measure that for hardcore Kirchnerism is still unsympathetic.

Not only does the soybean dollar come to save the reserve goal that Argentina agreed with the IMF –the differences in this case would be corrected by appealing to the impact of the war in Ukraine on the cost of energy–, but also the fiscal goal. The collection of export duties (withholdings) stagnated as of October – when the first soybean dollar ended – and now the numbers give the Treasury a deviation of 0.3 percentage points from the agreed goal of 2.5% of GDP with the IMF. “One soybean dollar would allow the fiscal goal to be redirected back to 2.5%,” they explain close to the minister. “There is no longer much vocation to adjust anything on the other hand,” they acknowledge. The times of pre-electoral politics began to run.

For the market, times are also accelerating. First indicator: the dollar woke up this week from its slumber. “The dollar was the only thing that was beginning to be cheap in Argentina,” summarized an operator of many battles. So far this year and until October, inflation measured by INDEC accumulates a variation of 76.6%, while the stock dollar adds 57.3% and the so-called “cash with liquid”, 62.5% . All in a context in which the BCRA continues to inject pesos into the market through the purchases it makes of sovereign bonds, in an attempt to sustain the prices of the titles issued by the Treasury. In the market they estimate that since October and so far in November, the BCRA issued some $250,000 million in this way. The subject worries the IMF technicians, who have been asking the BCRA for explanations. They want guarantees that this issuance is not “to finance the Treasury.” It is, perhaps, one of the thorniest issues these days in conversations with the agency.

Second indicator: the Treasury is no longer finding it so easy to renew its debt maturities. There were meetings in the week between the banks and Finance. They are already negotiating future exchanges of titles in pesos. With a good dialogue with the market, Massa’s team wants to avoid repeating what happened in July. But they are running out of anabolics to offer the market. After the dual bonds – which pay inflation or devaluation, whichever is greater – there isn’t much else to offer. In the banks, there is already enough resignation. “We have to get used to the idea that in the summer we have to start having titles that expire after the elections and cross our fingers,” the president of a bank was honest. Already in the last tender, they remarked from the Facimex research team, the average term of the instruments placed was the lowest since 2021: 95 days. Today, Finance will once again test the appetite of the market. $164,000 million expire. “The tender will be crucial, since the economic team needs net financing for $96,000 in each of the four remaining tenders in the year to be able to close the financial program without further issuance,” alerts Facimex.

Close to Massa they continue to insist that “inflation is already beginning to drop by one point per two-month period” and they assert that next month the CPI will start with a “five ahead”. The expectations of economists and businessmen do not seem to be on the same track. It is to be expected that in the coming weeks the Government will move forward with more stick policies to contain prices. There are those who are pressing to replicate what was done with mass consumption companies, prepaid or telephone companies and negotiate a freeze with them.

Meanwhile, the “opulent” City of Buenos Aires is preparing to recover the co-participation funds that the government of Alberto Fernández took from it, and which, according to speculation close to the head of government, Horacio Rodríguez Larreta, the Supreme Court could return to him in a bug next week. Perfect timing –especially while Jorge Macri is enjoying his honeymoon in Europe, away from the economic hardships of the country–, to launch Fernán Quiros’s campaign in parallel as a candidate to succeed him.

A glimmer of hope exists, however, for Argentina among those who closely follow the energy business. For consultant Daniel Gerold, one of the most respected in the environment, Not only are there high chances that the Néstor Kirchner gas pipeline will be finished by June 20, 2023, but he believes that Argentina could again have an energy surplus between 2024 and 2025. His estimates show a surplus energy balance of some US$5 billion in 2024 and of just over US$10 billion in three years. Few public debt sustainability analyzes today take this fact into account. Investors still choose to stay away from Argentina.

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