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ECONOMY | 26-04-2023 11:05

Massa’s disobedience, Kirchnerite fury and inflation fears

Economy Minister Sergio Massa will force a political debate in the wake of exchange rate crisis. Kirchnerism once again points finger at agricultural producers.

Economy Minister Sergio Massa demanded that Central Bank Governor Miguel Ángel Pesce intervene in the secondary market to put a stop to the run on the exchange rate that the market has pushed throughout almost the entire day, with no resistance from either the official or his friends. The order came as a surprise, because the Central Bank had its hands and feet tied when it came to using reserves, according to the rules of the latest agreement with the International Monetary Fund. A political decision was being imposed on the bureaucracy to demonstrate that the firepower was in a position to be activated. From Massa’s entourage, they are already talking about a new phase: political action to prevent him from being expelled from the presidential race.

The minister warned the IMF of the move, but did not ask for permission. The multilateral lending organisation will continue with a recipe that makes its own rules more flexible and confirmed the opening of a window for agreement’s renegotiation and a modification of the terms, which would allow the foreign exchange storm that is battering the government of Alberto Fernández to be overcome. Even so, the move arrived late and the exchange rate gap between the official dollar and parallel rates are already at a record high.

Sources from the economy portfolio confirmed to Perfil that "there is a clause prohibiting such intervention," but that it was previously "unknown." In this context, the Central Bank managed to get hold of dollars to use to prevent the exchange crisis from hitting the level of reserves – and not because of the soybean dollar. This Tuesday US$1 billion more of funds entered the coffers of the BCRA, corresponding to a fourth disbursement committed by China, and it is expected that next week another one will arrive.

According to market sources, thanks to the US$41 million bought on the second trading day of the week, the Central Bank managed to remain in positive terrain during April at around US$230 million. This happened despite the fact that the soybean ‘dólar agro’ policy only contributed US$61 million to state offers. Farmers put the hand brake on the liquidations in the face of the exchange rate jump in the parallel quotations. The forecast of a sharp devaluation before the end of the year prompted them to freeze operations, even urgent ones to pay obligations. "It is totally logical," admit those in the inner circle of economic management. This is a benevolent view of the actions of the countryside, because it came from a sector of the government linked to Alberto Fernández.

For Kirchnerism, "the countryside is behind the club of devaluators." At least, this unease is present among officials who answer to Vice-President Cristina Fernández de Kirchner. The external vocalisation of this thought would create tensions between Massa and a partner with whom he had negotiated a floor of income in dollars. That bid to avoid uncertainty has clearly failed, but what enters in this window that has yet to be closed will serve, they believe within his inner circle.

Meanwhile, local business leaders have their calculators out and are reassembling their price lists daily. Every week there had been remarkable rates, with rising costs and uncontrolled inflation. For many domestic consultancy firms, consumer prices for food have accelerated in recent days. The Centro de Estudios Scalabrini Ortiz (CESO) found that fresh foodstuffs are leading the way, increasing at a weekly rate of three percent. Inflation in the last four weeks shows an acceleration of 5.8 percent, with the biggest increases in dish and seafood (22 percent), eggs (15.7 percent) and fruits and vegetables (13.0 percent)."

The government has come out publicly to accuse the opposition and sectors of the market of leading a run of the exchange rate. What it will seek is to name those "responsible" for a situation that "is generating very big business for some actors," according to the complaint from an official close to the fifth floor of the Treasury Palace.

"There are some players in the market who know the Massa who works 16 hours a day and talks to everyone, but it seems to me that between now and Friday they will discover the Massa we know in politics – when he gets tired of being bullied and fights with everything he has," said Lower House Speaker Cecilia Moreau last week.

Perhaps it was a preview of some of the measures that the minister will soon put in place, as he battles with the markets and what they could do to his presidential candidacy.

Ariel Maciel

Ariel Maciel

Editor de Economía Política en Perfil.com - Mail: [email protected]

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