-There is a lot of talk about fiscal sustainability and State reforms. What does each one mean and what are they for?
-We talk about fiscal sustainability to refer to whether a certain trajectory is maintained over time. But in many cases sustainability is political, that is, how much the political system is willing to sustain adjustment measures to reach equilibrium. The support that determines sustainability can come from the Executive Branch, Congress, or the Judicial Branch. The State Reform is something else: it aims to eliminate obstacles and regulations that hinder the functioning of the economy.
-Does Argentina have fiscal sustainability or lack thereof? What does getting it depend on?
-I believe that the fiscal consolidation that is being achieved in Argentina is sustainable and that is mainly due to the fact that the fiscal measures and the objective of eliminating the deficit have strong support from the President. This is quite new in Argentina, where historically the weight of fiscal responsibility fell mainly on the Minister of Economy. The challenge for the future is to improve the quality of the fiscal adjustment and, in part, that will happen with the approval of the fiscal package in Congress and with the economic recovery, which I estimate will begin during this quarter.
-It is requested to improve the quality of the fit. The IMF also mentions it. It would?
-The Government has prioritized eliminating the fiscal deficit and that has required, for example, greatly reducing public works and delaying some payments. With the restitution of the Income Tax and the greater resources that are generated with the recovery of economic activity, the cutting of public spending can be made more efficient without abandoning the objective of maintaining a zero deficit. In particular, the restitution of the Income Tax, irresponsibly eliminated by Sergio Massa, will make the fiscal adjustment financed in a more equitable way. That is improving quality.
-The President said that Argentina has to achieve structural fiscal balance. Is it a way to recognize that the blender and the chainsaw have a limit?
-As inflation goes down, and I think it will do so quite quickly, the liquefaction effect will become less important. Cuts in public spending are necessary and must affect the enormous inefficiency that spending has today, added to the corruption inherited in many programs.
-Returning to the concept of fiscal sustainability, is it the irreversibility of a measure or an adjustment that would perhaps completely convince the markets and investors? In our country the corrections and changes seem reversible the day the opposition takes office. Do you agree?
-Unfortunately in Argentina this has been a recurring problem and is one of the reasons why the country has so little credibility in the capital markets. This problem can be overcome only if the policies are successful and manage to get Argentina out of stagnation.
-Is the new pension formula here to stay?
-I think that for now it is a step forward although retirements are still very low and the system rewards those who did not contribute over the workers who contributed. In the future it will be necessary to discuss a new reform of the pension system.
-Could Argentina return to the markets in 2025 or does it need to ask the IMF for money?
-They are two separate things. On the one hand, I believe that the IMF has the responsibility to support the economic program after several years in which it did not contribute constructively to improving economic policy. For this reason, I hope that the Government can negotiate with the IMF a new agreement of extended facilities that allows the arrival of fresh funds to achieve a rapid exit from the stocks and thus facilitate the entry of investments that will contribute to growth. Under these conditions, Argentina will be in shape to regain access to the international capital market and manage the management of public debt on a path of decreasing public debt to GDP ratio. The financial fiscal balance and economic growth will both be the drivers of the reduction in public debt.
– Why do you think Argentina could receive money from the IMF? Just to meet the goals or will they ask for something more?
-I believe that the function of the IMF at the international level is to help countries solve their economic challenges by implementing appropriate economic policies in the fiscal, monetary and exchange, and structural areas. Argentina is implementing a series of reforms that are precisely what an organization like the IMF exists to support financially and technically. At this time, furthermore, I believe that the US Treasury is pushing the IMF to be more active in fulfilling its mission. We are seeing it in the expansions of programs that have been adopted in Egypt and Pakistan, in a new expanded program with Ecuador, and in incipient discussions with El Salvador.
-Would that money that the IMF would eventually disburse be used to support the dollar and avoid a devaluation?
-Additional funds that may be received from the IMF should not be used for interventions in the exchange market. If a flexible exchange rate regime is adopted, the BCRA should intervene only in very specific cases. Today credibility is anchored in the elimination of the fiscal deficit and monetary issuance. Having a higher level of reserves will be very important to generate credibility and regain access to the international capital market. In emerging economies, the management of international liquidity, together with the administration of public debt, is essential to reduce country risk.
-What do you think of the discussion about the exchange rate delay?
-Whenever an economy recovers and stabilizes from a situation of high inflation, the currency appreciates in real terms. In the Argentine case, the starting point is one of historically low wages and a depreciated real exchange rate. I think it’s not a problem at the moment.
-Would you recommend leaving the stocks today?
-Without a doubt, I have maintained it from the beginning. But I also accept that the strategy followed by the more prudent economic team is working. The sooner we get out of the trap and repeal the penal exchange regime, an aberration for the civilized world, the faster economic activity will recover.
-The Federal Reserve was prepared to begin a process of lowering rates and that seems to be aborted or suspended for the moment. Could a more appreciated dollar have an impact on emerging markets like it did in the 1990s?
-I believe that the Federal Reserve has not substantially changed its view on monetary policy. Despite the latest inflation data that was disappointing, Powell maintains the view that the US economy is healthy and in a better balance between demand and supply and that the only thing he has decided is to wait a little longer to start a cycle of inflation. lowering of rates. The market had become overly optimistic at the end of last year, expecting that the cuts would begin in the first half of 2024 and that there would be several reductions during the year. It is more reasonable to expect the rate decline to begin in the fourth quarter as long as economic activity remains strong.