Sense of dread grows in Argentina with difficult March ahead

March is only a few days away and the economic dynamics of the month ahead are already proving scary for various reasons. For a start it’s always a time when seasonal factors heat up the economy, straining wallets. This year in particular it’s on course to become “March, the dreaded.”

Most private consultants are forecasting prices to rise between four and five percent in the 31 days ahead. The INDEC national statistics bureau has already posted inflation of almost four percent for January with more of the same likely this month. Fuel price increases averaging nine percent will impact the entire economy.

March the terrible is set to top January and February and with that momentum, the first quarter of 2022 will have a floor of double-digit inflation at the very least.

Not in vain, some government officials have begun to cover themselves against the rise in food prices, which has already been the Achilles’ heel of various governments. For the last four years, food prices have been above the monthly average, with and without pandemic, with and without this government.

It’s clear that there is not even one piece of good news which the economic team can capitalise in price terms. Especially with the surge of the “blue” dollar, which does not create a relaxed horizon for fixing prices to be imagined. 

Ditto the level of Central Bank reserves, another of this dreaded March’s hot numbers, because out of those coffers will come the US$2.091 million which Argentina is due to pay to the International Monetary Fund (IMF) on March 23, in order not to fall into default.

While the Central Bank’s international reserves top up at US$37 billion, amber lights are flashing in the market due to the scarcity of liquid reserves, or what is available. The most pessimistic speak of US$400 million, a figure naturally downplayed inside the Central Bank where they repeat that just last year the monetary authority pumped up the reserves by US$5 billion. They also bet on the acceleration of that key IMF agreement. Economy Minister Martín Guzmán is a man in a hurry.

Under Miguel Ángel Pesce, the Central Bank awaits the signature of a swap with China for US$3 billion. Dollars do not abound, thus making it crucial to close the negotiations with the IMF in March. If all goes to  plan, the government will pay up and, almost immediately, the Fund will replace the money in a show of financial cosmetics. Guzmán was hoping to speed up talks with a face-to-face meeting with IMF Managing Director Kristalina Georgieva at the G20 summit in Jakarta but he finally decided stayed in Buenos Aires, participating only in the event via Zoom.

Instead, Argentina’s representative to the IMF, Sergio Chodos, travelled with the difficult mission of absorbing the backlash in the international sphere from President Alberto Fernández’s trip to Russia and China, with which the government tested its relationship with the United States, the strongest voice and vote on the IMF board.

Parallel to the negotiations with the international lender (with its fine print still unknown and the risk of not receiving a green light from Congress) will go negotiations over the increase of the electricity and gas bills in the Buenos Aires Metropolitan Area (AMBA). Leaked drafts from the ENRE regulatory agency have left it clear that the subsidy cuts will be limited and will only fall on the Federal Capital and Greater Buenos Aires. Until now there has been no formal communication from companies in the sector with the public hearings for the electricity bills around the corner.

All these increases (real and potential) will hit the collective wage bargaining talks for 2022, which this March will be in high season. The Labour Ministry, headed by Claudio Moroni, celebrates that the IMF’s “conditions” for a new deal do not include pensions or labour reform, while reproaching Guzmán for not allowing annual wage increases because inflation shows no sign of giving way.

The Central Bank is also kicking out because inflation shows no sign of giving way, thus slowing the speed with which the official exchange rate can be updated while buying dollars to calm the market.

Guzmán is also not free from the darts aimed at him sotto voce by Domestic Trade Secretary Roberto Feletti, the “Iceman” who has now fixed his gaze on rents and has admitted that his battle to freeze the prices of fresh foods is melting away.