Argentina 2001-IMF/ 2019-IMF; technocracy and crisis, déjà vu

Suspicious and unexpected concurrence of Mr. Dujovne and Mr. Lopetegui to warn Lagarde in Washington, reminds me of the desperate and untimely itineraries of the minister Domingo Cavallo during 2001. Why? If the technical team of the international organization has just left. The first IMF program served to avoid Argentinean default and at the same time finance the flight to quality of capital by relieving private lenders from risk, saving banks and investment funds, preserving the international financial system, with devastating consequences for Argentina in terms of reserves lose. The second economic program of the IMF had as objectives: to split the race between the dollar and inflation, when the dollar had already increased 100% and inflation exceeded the 200% the targets. More than anything the IMF sought to avoid default, and if possible to lower country risk, to try to keep the debt performing then the banks do not have to "foresee losses" providing scary balance sheets impacting the New York stock market.

To reduce the new and increased deficits of the "inheritance received" an reduce the fiscal deficit, deficit in the current account of the balance of payments and the frequent instabilities of the BCRA, seemed to be the supplementary purposes, preventing recurrence of awful circumstances. The IMF wanted the inflation rate be contained and that the economy try to manage to hold until the presidential election in October.

I do not believe that today the objective is that the current administration arrives with chances to the presidential dispute in October-as the friendly media says. The purpose is much more modest. The intention is to get Mauricio Macri to finish his term without having to call an early election, or a resignation and convocation to the Legislative Assembly as in 2001.

It is that I do not know how Mr. president arrives at the October election, without an immediate reactivation of the economy. If the government and its support environment believe that with a slow recovery can excite the different social actors and markets, they live in the ozone hole. Argentina fell apart. He fell out of the world of financial markets. Nobody but the IMF lent money again, since January 2018. And, without external credit to finance the twin deficits while at the same time pedaling the financial bicycle, the only alternative was the "economic Trotskyism", the revolution of permanent austerity. The standard recipe of the second agreement with the IMF includes; recessionary fiscal policy with goal of reducing the primary deficit to zero in 2019 and surplus of 1% of GDP in 2020, but the tax collection in January is already falling 6% in real terms. We have to adjust more. The monetary policy must be super recessionary with a goal of expansion of zero monetary base and rise of extravagant rates for the bonds “Leliq” again, to avoid this new dollar versus inflation, for the moment without success. February is walking to 4% inflation and the dollar shot up to $ 43.50 on Thursday 8th.

In this theoretical-economic framework, there are no options to stimulate aggregate demand, doing expansive fiscal and monetary policies, in addition to the impossibility of get more money by the level of excessive indebtedness and the lack of financing. Thus, the Government has been disclosing any scarce measures to give signs that it will strengthen consumption and economic activity. But with a recessionary macroeconomic policy, these obvious show of advertising measures to do political impact will have an insignificant result at the aggregate level. It only will take advantage to help discretionally some friends of the production ministry, because with the macroeconomics against, neither Coca Cola which is in several economic-financial problems is efficient in Argentina.

As you can see, things get worse every day. The economy contracted in the last three quarters of 2018 at an annualized rate of minus (-9.5%) (as in 2002 with crisis, default, breach of contracts. You know the “best team of the last 50 years” as Mr. president said in 2015 (laugh)  , last year closed with an average fall of minus (-2.7%), leaving for 2019 a negative pass of minus (-3%), no room for maneuver and social effervescence-people asking for food at the door of the richs in their country clubs

The primary fiscal deficit is reducing, but the financial deficit growth and the external deficit growth doesn’t help.

This emergency plan to finish the mandate has in no way been the beginning of a path towards a path of sustainable public debt. So we are going to messy bankruptcy. The economic program is a "bullet against", extremely dangerous and goes in the opposite direction to the correction of poverty and indigence. It still goes against the markets, because it does not tend to reduce uncertainty, but to increase it, having already generated the 2001 Déjà vu in international media. In figurative terms, we could say that we are in a political-economic and social time the same that of March 2001 before to call Mr. Cavallo, but with less margin and less level of illustrious economists at hand.

It needs an immediately cabinet change, economic plan and it looks like unavoidable to restructure the agreement with the IMF, to avoid a social explosion.

A minister of "political economy" is needed, not a seller of macroeconomics reports who give funny corporation lectures.

GDP, consumption, investment are falling down. Inflation, workers suspensions, unemployment, poverty and indigence grows. But it will be much worse if a renegotiation with the IMF and a restructuring of the debt with private creditors do not take place quickly.

With an economy in free fall, the presidential election looks unattainable, the situation is challenging for "politics". The time of the CEOs and technocrats is over. The president must make decisions now. Played by played, anyway there is no chance of a re-election of Mauricio Macri and, if the Peronism is not awake right now, they will get again a great disaster when they will be in charge. The derail in slow motion that we are seeing is accelerating its march and we can crash the country with consequences nobody never seen.