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recession, dollar, IMF and an economic plan that does not hold up

February 24, 2024 – 10:09

Aside from the tax discussion, what seems to be at stake is much more than that. The intransigence as a unifying method that Javier Milei implemented from day one of his mandate now seems to be in check.

The one who sows winds, reaps storms. The governors of Patagonia supported the announcement of the governor of Chubutthat threatened to cut off oil and gas shipping from his province if the Nation does not send him $13.5 billion in co-participation. Everyone joined in on that initial statement. the governors of Together for Change and also the main Peronist provinces.

Aside from the tax discussion, what seems to be at stake is much more than that. The intransigence as a unifying method that Javier Milei launched from day one of his mandate now seems to be in check. How far can a national leader go who does not have the support of any governor? What type of political structure will he be able to form in Congress?

Not everything is what it seems

Clearly the political map today can no longer be read by disaggregating party spaces. Nor through the always current rift between Peronists and anti-Peronists. We will probably return to these categories later, but what became evident today is that the Casa Rosada is willing to use fiscal proclamations to traffic the creation of blacklists that they incorporate into “the caste” anyone who does not agree with what the president orders.

Needless to say, this feeling of provincial rebellion is accompanied by a no small detail: while the financial market has regained value and country risk is decreasing, The real economy has begun to give warning signs not only through the numbers of activity, employment, inflation, consumption and investment, but also in the large group of union entities and groups that have come out to protest in the streets against the enormous loss of purchasing power. Added to this are the doubts inherent to a stabilization plan that wonders what decisions it will have in the pipeline. Minister Caputo when facing the coming weeks regarding devaluation and dollarization.

The plan does not hold up: the race for dollars

The warning of IMFwhich, as anticipated in this column two days ago, materialized in a release showing that the economic program does not close because it does not guarantee that it can be sustained over time based on the social costs it implies. Footnote, the IMF is not concerned about affecting large sectors of society with the liquefaction of their savings (via monetary aggregates) and erosion of purchasing power via rearrangement of relative prices and deregulation: what bothers the IMF is that the plan Milei’s government does not seem solid enough to “win” enough time so that the structural reforms that will guarantee the medium term can be carried out. How will the IMF evaluate what is happening during these hours between the provinces and the Nation? What kind of reading will not only Milei (who will participate in an event with Donald Trump) but Secretary of State Antony Blinken take to the United States?

The Government thinks that it has done its homework so that in the coming weeks it begins to evaluate a large future disbursement from the IMF for Argentina. The commitment to “splicing” a new program at the end of the year pushes that hypothesis. Although the surplus is key, the IMF itself left it concerned: how far can the positive result of the public accounts be stretched if, as it seems, the surplus January was achieved thanks to the cut in pensions, the brake on the transfer of transfers to the provinces and the nominal freezing of the rest of the items? This is also where the fight with the governors starts.

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