Budget and fresh money to reach the autumn of 2019

October 3, 2018 - By Joseph Taylor

At dawn last Thursday, the Chamber of Deputies gave a half sanction to the 2019 Budget project. After noon on Friday, the International Monetary Fund opened the window where more than 56,000 million will go to Argentina. The Government made sure in the last hours (if nothing unusual happens in the Senate) the two tools with which, he says, it is able to “cross the desert” until the expected exit from the crisis, the uncertainty and the recession.

Society must prepare for five difficult months until the fall of the second quarter of 2019. Difficult because news about economic activity will continue to be more or less bad, consumption is not expected to rise and by the end of the year, fears about the social conflict.

There are also unpredictable variables and over which there is no control. It can be summarized as follows: the government asks the world to “not make waves”.

The draconian fiscal and monetary adjustment in which the Government decided to embark is a challenge that will test the “resilience” of society.

When autumn arrives, there will be five months left for the PASO, and seven for the presidential election.

Officials have faith: they bet that by Sunday, October 27, economic activity would be growing at a rate of 8.5%, a percentage that takes as reference the very low floor of this year. Anyway, it is about appealing to a “Chinese rate” that brings Mauricio Macri closer to reelection.

So today, a year before the elections, Macri begins the last stage of his term in a situation unthinkable at the beginning of 2018. He accumulated less growth, more inflation and depreciated wages.

The paradox is that after the severe devaluation and the severe adjustment set in motion – constrained by the circumstances – the outlook for the future looks different.

When looking at the full half of the glass, the economic team highlights several verifiable data: even if it is due to the recession, the trade balance turned positive after 20 months.

The current account deficit narrowed appreciably. The Central Bank highlights the sharp fall in the demand for dollars and gives as an example what is happening with the expenses of Argentine tourists abroad and purchases of foreign currency for hoarding.

When looking at the empty half of the glass, the balance is obvious: galloping inflation, severe deterioration of purchasing power, a not very encouraging picture of the labor market, falling consumption …

So the government is preparing to face the election year with this scenario: the balance of the first three years is far from having reached the objectives of the start of the mandate. But officials trust that this time the adjustment will work. And it will even allow them to win an election. It happens that the electoral strategists of Cambiemos trust that the voter arrives at the ballot box by evaluating the government for what is happening in October 2019 -those Chinese rates- and not for what happened in 2018.

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