The Minister of Economy said that for the Government there was something more important than Congress approving the Base Law in the coming days: that businessmen would trust and decide to invest.
It was at the Latam Economic Forum before an important group of company executives who, in general, They claim to support the postulates of President Javier Mileibut who maintain doubts about the Government’s possibility of achieving a sustainable political scheme to advance the reforms.
Luis Caputo He asks them to trust and they claim to trust, but they highlight that, after six months, the Government has not managed to get Congress to approve a law.
Thus, the circle that allows the investment to be launched is not formed, despite the general conviction that Milei will not give up the objective of achieving the fiscal surplusone of the pillars to support the decline in inflation.
The May inflation figure in Capital of 4.4% (in April it had been 9.8%) seems to confirm the forecasts that the increase in the cost of living measured by the INDEC will be less than 5%. For the consulting firm Eco Go it would be 4.9%.
The formula of fiscal surplus and an official dollar growing at 2% to lower inflation remains firm in the Government’s decisions despite the turbulence in the financial market this week.
The rate of risk country rising up to 1,600 points as a result of the drop in bond prices, it remains the balance of one week with a political setback for the Government in Congress (the retirement regime that the opposition approved in Deputies) and with doubts about the Central’s ability to continue buying dollars from farm exports.
The unwritten rule that when free dollars move, the price scheme becomes tense was discussed again this week and at the Latam Economic Forum, economist Ricardo Arriazu insisted that keeping the official dollar growing at 2% monthly It must continue to be the basis of the official program to stop inflation.
The concept that If the dollar moves, all prices move, and not only those of exportable products, because in Argentina a bimonetary economy, It is consolidated as a strong idea in the Government.
So much so that Some technicians suggest Caputo think about the possibility of eliminating the 2% monthly fixing the dollar for a few months until they are in a position to effectively lift the exchange rate.
The President insists that to lift the stocks it is necessary to first end the Central Bank’s liabilities, which, although they fell from $50 billion at the beginning of the administration to $18 billionthere is still a journey.
Economist Salvador Vitelli tweeted about the President’s phrase that “when we solve it, bye stocks”: he calculated that the Central Bank’s liabilities are equivalent to US$23.15 billion, a not inconsiderable figure to expect an imminent lifting of the stocks.
Regarding the liabilities of the Central Bank, the latest report from the consulting firm Abeceb highlights that “they contracted abruptly in real terms. The Leliqs disappeared and the stock of remunerated liabilities grew only 60% in one year, against an inflation of 280%.”
And he goes on saying that The first condition to recover growth is to lift the exchange rate.
He thinks it is a “requirement sine qua non to revitalize foreign direct investment and regain access to global credit markets, No company sinks capital if it cannot later pay dividends and no one lends if they cannot later repatriate what they lent.
The Central Bank’s need to increase reserves (it is still unknown how the Government will comply with the US$5 billion of the China swap that expires between this month and next) collides with the bet to keep the official dollar growing at 2% monthly .
This tension is here to stay in the short term and as long as the exchange rate continues to limit the payment of imports and the transfer of profits and dividends from companies.
The scheme of semi-fixed dollar faces the first acid test and the Government is increasingly tied to that exchange rate firmness.