The 10-point drop in the COUNTRY TAX (from 17.5% to 7.5%) opens a new challenge for the economy in September.
An unprecedented aspect of this tax reduction will be to see how much of it will be passed on to the prices of imported products and its impact on the costs of a large part of the goods consumed in the domestic market.
The decision of lower prices It will be a sensitive test in September when, in some way, it will cross with the lesser or greater credibility and confidence that the stability of the exchange rate scheme in which the government of the president is committed will inspire. Javier Miley.
The Minister of Economy, Luis Caputoanticipated that he expects the contribution to lowering prices to be significant based on the government’s insistence that the price trend and the devaluation of the peso converge at 2% per month.
This month the financial-exchange scheme enters another stage to revalidate the balance and confidence, a point that Carlos Melconian and Pablo Goldín analyzed in The Nation by stating that “severe fiscal adjustment without regaining confidence (lowering country risk/capital inflow) is not so automatic and may pay a very high additional cost in terms of activity and employment.”
In this context, a key fact that the market continues to follow is the purchase of dollars by the Central Bank, which in the last weeks of August had a recovery of more than US$ 600 million, thanks to the calm exchange rate supported by the intervention of the monetary entity in the market and, it is believed, of the postponement of payment for imports awaiting the reduction of the PAIS tax.
That is also why the financial march of September (the deadline for the 30th is launder money with the lowest fine) becomes relevant.
The increase in private deposits in dollars began to reflect the movements of money laundering.
Foreign currency placements in banks have grown by US$ 1,311 million since the end of June, of which US$ 491 million They entered since August 12, anticipating one of the results of the money laundering that, in terms of collection, according to the calculation of the International Monetary Fund and at the official exchange rate, could contribute some US$ 1.8 billion.
In September, in addition to the ability of the reduction of the PAIS tax to contribute to a reduction in taxes, the consumer pricesthe possibility of the Central Bank buying dollars to strengthen reserves and significantly break the 1,500 point floor of the country risk rate.
A key issue that makes it difficult to reduce the country risk is highlighted by Jorge Vasconcelos in a report by the Fundación Mediterránea: “they are the public debt maturitiesexternal (up to the beginning of 2026, US$ 13 billion are in the market, in addition to commitments with multilateral organizations) and domestic, its impact on expectations and the fear of a domino effect due to the high proportion of Treasury bonds in the assets of the banking system.”
The transfer of short-term debt from the Central Bank to the Treasury consolidated another delicate situation due to “the accumulation of public debt in the last five years and the lack of genuine market demand led to the creation of strong incentives for financial institutions to become bond demanders“.
In this way, Vasconcelos continues, “today Almost 50% of banks’ assets are invested in public securitiesa ratio that in 2015 was around 28%.”
The future of these Argentine bonds, despite the President’s commitment to maintain the fiscal surplus which would allow debt payments to be met, remains in doubt in the markets, although the last few days have yielded positive results.
The government enters September in the ninth month of economic management and in addition to the result of the reduction of the PAIS tax and the money laundering, the debate on the strategy of betting on the reduction of inflation on the basis of a dollar that points to backwardness and deepens. the growing conviction that the exchange rate restrictions are prolonging their validity.
With the official dollar almost fixed, intervention in the exchange market and currency controls, the short term may yield results in terms of continuing to calm inflation, but the underlying uncertainty will continue to play its part.