By Carlos PagniFor the Nation
Cristina Kirchner exhibited yesterday, from Honduras, the conceptual and political platform from which she attends the negotiations between Alberto Fernández and Martín Guzmán with the International Monetary Fund. The core of that thinking is as follows: the Fund, the great powers, the "great power banks," the United States, and the judges who condemn corruption are all the same: neoliberalism. Yesterday he added an actor: drug dealers.
The vice president went further than she had ever gone before. She postulated an identification between capitalism and drug trafficking. He denounced the “multilateral credit organizations” –he said “funds”, but immediately censored himself- that impose adjustment policies. By doing so, he argued, they weaken the state to the point that its role is replaced by dealers in prohibited drugs. It would not be, according to her, an unintended consequence. There would be a plan, which is also verified in that "the banks of the great powers (sic) launder money from drug trafficking." Until now, the Fund's technicians were despicable friends of Macri. But since yesterday they have become accomplices in drug trafficking. That Guzmán take a good look at who he hangs out with.
The Bolivarian public to which she was addressing inspired another reflection in Mrs. Kirchner: she spoke of "those who used to finance military coups and now finance judicial coups", in reference to an organization that encourages the formation or training of judges who investigate the corruption. Here, too, self-censorship seemed to have prevailed: she did not mention the United States. A consideration for your colleague Kamala Harris, who arrived at Xiomara Castro's inauguration with a plane full of armored cars.
Yesterday's were the coordinates within which Fernández and Guzmán must reach an agreement with the Fund. They are very determined by that opinion. While they pay religious attention to their boss's every word, they let the short circuits of the daily economy continue to be subjected to an increasingly dangerous inertia.
“If you have a power outage, connect to the dollar that is at 220″. That joke, which was circulating on the networks yesterday, paints well the state of the economy. Cash with liquidation reached 230 pesos yesterday. The difference between the official wholesale dollar, which was sold at 104.72 pesos, and the blue, was 110%. The risk index is at default levels: more than 1900 points. They are the superficial traces of a landscape that has been seen many times in the history of the country. However, this time there is a difference. The Government does not feel obliged to propose a solution to the problems. You assume that your only responsibility is to come to an agreement with the Fund. To a "dignified" agreement. The rod of that dignity, he demonstrated yesterday from Honduras, is in the hands of Mrs. Kirchner.
The dissociation between negotiation and the inventory of daily mismatches is striking. On the one hand, the variables of a program are discussed with the main external creditor. On the other, material life is deteriorating, as the General would say, "with great negligence on the part of the authorities." This indolence would be justified: nothing that happens in the economic field would be the responsibility of the ruling party. Blame it on the pandemic. From the real pandemic: Mauricio Macri and his administration. Kirchnerism has a great ability to invent cursed inheritances. He justified his difficulties for twelve years in the fire he received in 2003, that is, he suppressed from history the two years of ordering of the government of Eduardo Duhalde. That is, who brought them to power.
Now the ruse is repeated. Because it is indisputable that Macri left a very complicated situation. Even so, the Central Bank reserves that Fernández received were 14,000 million dollars; yesterday they were 1,200 million, which will be reduced to 500 on Friday when the Fund is paid; the cost of public services was 70% covered by fees; Today it does not reach 30%. The primary deficit, which today is 3, if viewed benevolently, was 0.4 points of GDP. Even inflation, which with Macri ended up being very high, is also worse: it was 3.7% in December 2019 and 3.8% last month. Summary: the general picture, after two years, worsened.
The disconnect between this panorama of difficulties and the negotiation with the Fund is a childish illusion. As the deviations become more acute, the corrective measures required to achieve stability become more demanding. It is Fernández and Guzmán, with that symbiotic propensity to procrastinate, who make the agreement with Kristalina Georgieva increasingly painful. The program that they intend to agree on today would have been accepted without substantial objections during the year 2020. The pandemic justified any heterodoxy at that time. If they had tried to close the deal in April of last year, they may have avoided a devaluation. Now the tourniquet is mortifying. The most obvious fact is that the exchange rate gap to be reduced reached more than 100%. With a detail that must be taken into account: cash with liquidation is at 230 pesos after imports in December reached a surprising record of 6,216 million dollars. This means that the excess of pesos is so prodigious, and the anxiety to get rid of them so intense, that it is capable of boosting cash with liquidation and imports of goods at the same time. Put more simply: the public tries to earn dollars however they can, through cash with liquidation or by buying things "made of dollars": consumer objects, trips abroad, supplies, merchandise to sell, etc. The more this difference between the official dollar and the free dollar becomes pronounced, the greater the devaluation necessary to restore equilibrium. In other words: although the Government wants to disconnect from the agenda of daily concerns and talk only about the negotiation with the Fund, both planes intersect. For example, at the level of devaluation that will be required by the skyrocketing of the dollar.
Officials caught their breath. In December the talks had frozen. Ten days ago they were reopened, at the request of the three countries that lead the negotiations from the Fund's board of directors: the United States, Japan and Germany. Those three nations are coordinated in Washington. Also in Buenos Aires. Perhaps it is asking for an excess of sophistication, but Fernández should ask himself if the constant reference to the United States as the only decisive agent is appropriate.
The discussion is locked in the most basic knot: how much bad news must Kirchnerism deliver between now and 2023. Put into numbers, it looks like this: the Fund's technicians, led by Ilan Goldfajn, claim that the Argentina reaches a primary surplus of 0.8% of GDP within two years. Guzmán asks that this goal be postponed until 2027, the date on which a surplus of 0.2% would be reached. A very important factor operates in this disagreement: the minister made a commitment in front of Cristina Kirchner to avoid unsympathetic measures until the next elections.
published "How to See Active Network Connections (Windows)" on eHow http://ehow.com/a005ed23f
— Jeff Wilson Wed Apr 07 23:15:12 +0000 2010
The sequence to achieve those goals poses an additional problem. Guzmán intends to reach a deficit of between 2.8 and 2.5 of GDP this year. He wants to set bands from which, if the economy grows more, the objectives set by the Fund are adopted more quickly. The unknown is from what level of deficit the reduction begins. Guzmán maintains that this year the imbalance will be 3 points of GDP. The experts who discuss with him believe that it will be 4.5%. They admit, as the Government alleges, that this year there will not be a large expense to assist the victims of Covid. Although there was not last year either. But they take into account that energy subsidies will be more voluminous due to the increase in the price of gas, especially if the Ukrainian crisis spreads. And remember that this year the Treasury will not have an extraordinary income of half a point of the Product, derived from the wealth tax.
In this instance of the controversy, a very relevant issue appears on the scene: the country risk index. This variable, which seems foreign to the negotiations with the Fund, is at the center of the debate. It must be remembered that in March 2020, at the request of Guzmán, the Fund's technical staff issued an opinion on the sustainability of the Argentine debt. Guzmán used that document before the private bondholders to justify the cuts he intended to make during the restructuring (https://www.imf.org/en/Publications/CR/Issues/2020/03/20/Argentina-Technical-Assistance- Report-Staff-Technical-Note-on-Public-Debt-Sustainability-49284).
In that report, which did not compromise the opinion of the Fund's board of directors, it was established that, for the debt to be sustainable, the country had to reach a primary surplus of 0.8% of GDP by 2023. Guzmán intends to reach that number in 2027. Therefore, this slower adjustment raises a question about the sustainability of the debt. For the minister it is a sacred question: ensuring that the State's liabilities were sustainable over time is the merit that would make him a hero in the face of those who seek, with his teacher Joseph Stiglitz at the helm, a new paradigm in financial relations between the public sector and the market. The country risk index that overshadows Argentina today casts doubt on whether the minister has the right to that imaginary podium. But the worst scenario would be that the Fund, to justify the intensity of the adjustment it suggests, declares that the debt is not sustainable because the parameters of that 2020 report were not reached.
The Fund's technicians have prepared a simulation, of very restricted circulation, associating the behavior of the debt with the levels of fiscal adjustment and growth of the economy that Guzmán intends. In that essay that, for the benefit of the minister, he considers a real depreciation rate of the currency equal to zero, the relationship between debt and GDP in 2027 would be 103.9%. That is to say: far from stabilizing or decreasing, that rate would increase. And it would do so at an inconvenient level, because the same professionals consider that a liability is only economically and politically tolerable if it does not exceed 70% of GDP.
Is it to be deduced that the Fund will demand from Guzmán that if he wants the kind of agreement he promised Cristina Kirchner, he must restructure the debt with the bondholders? No. Even though in the evaluation carried out by the agency on the program carried out by Mauricio Macri it stated that the technicians had suggested a debt swap. It is highly unlikely that they will ask the same of Fernández and Guzmán. But the argument is on the table, as a form of pressure.
As if they were fantasizing that the Fund intends to subject them to a new cut, the bondholders re-entered the scene. The Monarch fund's lawyer, Dennis Hranitzky, adhered to a proposal by the former president of the Bank of Ireland Patrick Honohan, who proposed that the Fund cut the surcharges it charges Argentina (https://www.piie.com/blogs/realtime -economic-issues-watch/imf-should-suspend-interest-rate-surcharges-debt-burdened). It is a bid between different creditors, who must collect from the same box.
Summary: just as the cash price with liquidation conditions the bid with the Fund because it forces a higher level of currency depreciation, the country-risk index or the level of debt sustainability determines the discussion on the speed of fiscal adjustment.
There is another front of controversy in which Guzmán is caught between the Fund's technicians and his promises to the vice president. The pricing policy. There is a well-known chapter of that policy, which is the one referring to the rates of public services. Mrs. Kirchner does not approve an increase above inflation. Even though the subsidies will have a very important increase this year, as a consequence of the skyrocketing price of gas. That variable, which was on the rise for a good part of last year, has now skyrocketed due to the eventuality that there is a blockade of the Russian gas pipeline that passes through Ukraine to supply Europe. Energy experts note that the state paid an average of $8.4 per million BTU last year, when futures for this winter are $27 per million BTU. These specialists attribute the rise to tensions in Ukraine but also to a systematic replenishment of stocks being carried out by European countries. Gas is one of the products that put Argentina close to the crisis between Russia and NATO. The other is wheat, whose price has skyrocketed on the prospect of a collapse in Ukrainian crops.
Electricity and gas is not the only price that affects negotiations with the Fund. The new chief economist of that body, Gita Gospinath from India, has developed a brilliant academic career linked to issues such as private investment, the quality of the macroeconomic environment for companies and, linked to that agenda, the behavior of prices. Guzmán will have to defend in front of her the rudimentary recipes of Roberto Felleti, designated in the Secretary of Commerce by the vice president to end inflation.
Fernández and Guzmán can ignore economic pathologies. But it is an irrelevant leak. These deformations corrode the political base of the ruling Peronism. Yesterday two studies were known that record the phenomenon. One of them, from Fixer, the Sebastián Tabakman and Sebastián Fernández Spedale consultancy, detected an eight-point rise in concern about inflation between December and January. The most revealing detail of this study is that the negative image of the President and the Vice President also increased eight points in the same period, in the sector of those who did not finish high school. Shila Vilker and Raúl Timerman also inquired about economic expectations and discovered that 75.4% of middle-class respondents believe that the economy will grow "little or not at all" this year. The curious thing is that, when the opinion of society in general is analyzed, that percentage is 71.9%. Among those who have only completed high school, this proportion is 73.6%.
The restlessness is more intense to the extent that Fernández does not propose a way out. A demonstration: the President sent an agenda for the extraordinary sessions of Congress in which the multi-year budget does not appear, the project to stimulate the production of hydrocarbons, much less the agreement with the Fund. These are some of the initiatives that he has been promising during the last two months.
On the other hand, the creation of the National University of the Delta appears to be urgently approved. There you can study everything: from artificial intelligence to behavioral sciences, from the environment to tourism. The only thing missing is Transportation, the science most mastered by the godfather of the new house, Sergio Massa. And that he has fought to the death with Martín Insaurralde. The verbiage with which the proposal is accompanied bears the unmistakable stamp of Massa. He dreams of turning the Delta into a hotbed for Leonardo Da Vincis.