Abram: This is not a solution to eliminate the fiscal deficit without a thorough reform of the state


But for an economist Aldo Abram "This option has always existed and we did not have state risk levels today." In his opinion, this is what explains mistrust "The possibilities for this have increased (that Cristina is again president) because of the currency crisis and the recession that the state is facing, economic indicators and under the pressure of the President's image, analyzes the director of the Exante consulting company.

Although it estimates that agriculture and the sectors exporting to Brazil will improve their activities, it does not exclude that these sectors "prefer cautious and sell cereals or foreign currencies necessary to pay their debts and live;" but nothing more. Therefore, most of the produced will remain as a saving outside the economy and will not help to increase the level of activity. "

Regarding the future, he points out that Argentina does not encourage productive businesses and warns that "we are still among 21 countries in the world, among the 190 countries that have compressed most businesses with taxes."

The size of the state is a serious problem for an economist.that our irresponsible political leadership does not want to solve the orderly and cheaper in society. "

He thinks that politics does not solve it, because "He is still convinced that time will solve the problems and put us in a situation of extreme vulnerability."

Journalist: What factors explain Argentina's mistrust?

Aldo Abram: Some believe that this is an electoral factor, the possibility of Cristina Fernandez returning to the government. However, this option has always existed and we did not have the country's risk levels that we have today. What has changed is that the likelihood of this happening has increased due to the currency crisis and the recession that the state is facing; which exacerbated economic indicators and gave a presidential image under negative pressure. On the other hand, although the government can claim that it has received a state and a central bank that has almost gone bankrupt, they can not deny their responsibility to maintain these problems, instead of solving them; which led to the current situation.

What is even worse, it is not clear why significant progress should be expected, which will obviously change the warmth of the majority of the population. It is true that the countryside and Brazil will stimulate the economy. However, the question is how much. If most Argentines and foreigners feel that the problems are not solved, agricultural producers would rarely have a different vision. So they are expected to be cautious and sell cereals or the necessary currency to pay their debts and live; but nothing more. Therefore, much of what will be produced will remain as savings outside the economy and will not help to increase the level of activity. We can expect the same from those who can export to the neighboring country to improve domestic demand. It is possible that the countryside and sectors closest to those who export to Brazil are the only ones who feel the improvement in the coming months.

V.: What are the main economic weaknesses of Argentina?

А.А. There are two fundamental shortcomings for the short-term treatment in Argentina. The first is linked to the "mother of all problems", a diagnostic mistake of our political leadership, who thinks that the "problem" is a fiscal deficit, when this is only a consequence of real, excessive public spending, which obviously can not be paid. There is no solution to the elimination of the fiscal deficit without a thorough reform of the state, which makes it seemingly smaller and more effective in the sense that it is useful for Argentineans. At best, this will mean that the burden that the productive private sector will have to bear is too heavy and will discourage investment, growth, job creation, wealth creation, the ability to pay better wages and lead to a slow decline. poverty. In the worst case, which, according to the state, is a risk for discounts on the markets, we will go on a new default.

Another weak point and the most dangerous short-term situation is BCRA. The decision to set the emission ceiling has reached a certain stability in the value of the pesos and thus the exchange rate. This allows us to assume that it is unlikely that BCRA itself will create the next series against our currency, just like the first administration that accompanied this government. This brought some peace of mind, which made it possible to slowly gain credibility and therefore merit. It is no coincidence that the interest rate falls within the framework in which BCRA tied its hands, without being able to bet in order to reduce it; which is a breakthrough. The exchange rate crisis in 2018 was linked to the surplus of issuance in order to reduce, inter alia, the cost of financing, because there were a very small domestic credit market because the country with a large deficit had taken up a large part of this loan. This caused high inflation and a loss of people's confidence in the BCRA and its currency.

The problem is what happens if another internal or external event develops a new course. We will probably see that the exchange rate quickly travels the distance that separates it from the roof of the belt, which is now almost 30% higher than the ground. It seems difficult to avoid panicking and a sudden decrease in demand for pesos. The worst idea would be to try to get back to paying the central bank debt to stop it if you did not even try it at all. What is the rate that would be rewarded for staying in a currency that loses the value of several percentage points a day? It will also not try to defend the ceiling by removing pesos in the amount of $ 150 million per day, as the advantage of the local currency will be in free fall. So, if all remaining weights are not absorbed immediately, they will continue to depreciate, the exchange rate will increase, and people will lower their preference for the domestic currency in the vicious circle. Unlike other countries where the monetary base can benefit from care, there is a problem in Argentina that demand may suddenly fall and contract, before you have to remove everything from the market. Not only does it not stop quickly, we risk that the exchange rate will degenerate into the bank; who can throw all promises over the deck, not to issue BCRA. The conclusion would be to ensure that the monetary authority, if the exchange rate touches the ceiling, will be defended with force and that it will eliminate all weights that exceed this value.

V.: What are the main economic advantages of Argentina?

A. In the short term, the Argentine economy has the main power, its agriculture. If climate and international prices help, you can respond with a lot of production in a short time. However, our politicians have pledged to punish it by excessive investments to fund the surplus of the country; making it less and less effective in its task, which discourages long-term investments.

We can mention a number of potential companies that exploit the human and natural resources we have. However, they will never be profitable and attractive if we continue to be among the 21 countries in the world, among the 190 most pressing their businesses with taxes and / or crisis to the crisis, in order to solve our country's surplus problems that our irresponsible political leadership He does not want to settle in an orderly and less socially valuable way.

Q: What are the main international risks that can aggravate Argentina?

A. A .: Let's start with reality. In 2017, 90% of economists said that the international scenario would be more complicated in 2018. much less than expected. Nevertheless, Argentina ended with a currency crisis and a recession. Why did not some other country in the region also happen?

Brazil put us in March 2018 in a political situation. With a transitional government with a very poor image. Presidential elections without candidates and where most likely left-wing populist who was imprisoned won. In Argentina, there is little argument that Macri will not be re-elected in 2019. Brazil's general government deficit and public debt in terms of GDP in 2017 were not better than those in our country. What was the difference that prevented Brazil from ending up as a neighbor? A sole central bank whose priority was to defend the real value and which inflation would close to less than 4% in 2018. Here, BCRA was in charge and was involved in issuing with the goal of liquefaction of the problems of maintenance of an elephant country; therefore, he lost all credibility and fell as a house of cards with the smallest international shake.

Now, most economists reiterate that year 2019 will be the year with less international liquidity, especially for Argentina. This means that there may be many markets with weaknesses, including ours, which may deteriorate. Inclusive, it would not be ruled out that for so many years of excess liquidity that were contributed by the main central banks of the world, they formed a bubble that is ready to explode. But even if they were not such a catastrophic, there are many factors, not necessarily economic ones that could cause shaking, such as the various "personal wars" of President Trump. In this context, the Argentine political leadership still puts it in time to solve the problems and put us in a situation of extreme vulnerability.

There are two ways for the Argentines. Firstly, we take citizens and demand that our politicians transform the country, by serving us, not by them, and paying for it. They probably can not do this from day to day; but they could announce as soon as possible how they will do so in the next two or three years. It is impossible for someone to bet that they will solve the problem if they have not yet acknowledged publicly that the country is too big, and even less they told us how they will be solved. Although this is the last issue to be urgent if we want to get out of the economic crisis, they should be required to face all structural reforms that are still underway. If not, my advice is to cooperate with our prayers, so that everything is miraculously solved, as we always expect our policy, a fact that never happened, and has led us to each of the debates that we have lived in the last 7 decades.


Source link