Faced with the accelerated devaluation of the peso and persistent inflation, Argentines are currently focusing on getting rid of their currency and buying dollars, in addition to seeking refuge in durable goods such as appliances, cars, construction materials and certain technologies.
The Argentine currency deepened its weakness due to the acceleration of inflation, which was already at 64% per year in June, and the expectation of a jump in the rate of official exchange rate, not only because of the scarcity of reserves and lack of financing of the fiscal deficit, but because of the uncertainty in the resolution of macroeconomic imbalances derived from political divergences within the government of Alberto Fernández.
“This is a problem typical of Argentina for a long time, typical of Argentina’s high inflation”, Camilo Tiscornia, director of C&T Assessores Econômicos, told Efe, since since 1945 Argentina has been distancing itself from the rest of the world. world in relation to price dynamics.
“This is causing a series of behaviors that do not exist in countries that did not have such high inflation”, considered Tiscornia.
The usual refuge of Argentines is the purchase of dollars for hoarding, but now they have also started to anticipate the purchasing durable goods before they go up in price.
“As long as they continue with this level of uncertainty, people will continue to buy durable goods to protect themselves from inflation, particularly when they don’t have access financial information or financial instruments to protect against inflation”, explained to Efe Matías Wilson, chief economist at the Argentine Chamber of Commerce.
According to Wilson, Argentines resort to household appliances, automobiles and some articles technology – because it has a shorter useful life – and highlighted that “it is common” to advance costs by adding materials for construction, at the same time as spending in pesos with tourism, which is also experiencing a boom in Argentina.
The consumer’s counterpart is the merchant or manufacturer who buys the merchandise or retains its production.
“I would exhaust all instances not to sell any kind of merchandise, including in dollars. First I would get financing, since rates are negative in relation to inflation”, recommended this week a report by economist Salvador Distéfano.
In this instance are agricultural producers, who retain the harvest for export in the fields – Equilibra consultancy estimates that approximately US$ 10, 3 billion remains to be traded – in the expectation of a more favorable exchange rate.
It is not convenient to sell with pesos because purchasing power is lost: the interest rate that remunerates time deposits is lower than expected inflation, while stock market instruments “are more risky, this is not what a more conservative person would do, is not that sophisticated”, pointed out Tiscornia.
The Central Bank, thirsty for reserves, launched this week a transitional mechanism, with which it expects producers to liquidate around US$ 2.5 billion, allowing them to acquire foreign exchange on the official retail market for 30% of the proceeds from the sale of grains and convert the remainder into deposits with remuneration linked to the evolution of the official exchange rate.
Argentina has a program in place with the Fund International Monetary Fund (IMF) to refinance a debt of US$ 40 billions of dollars, but in the last month the deterioration of financial variables has intensified.
For Tiscornia, “we are beginning to see that the fiscal deficit will not decrease” and “the expectation is growing that this fiscal deficit will cause more inflation because the government does not have many alternatives to finance it, it will have to resort to issuance of money and this implies more inflation.”
This month, moreover, the parallel exchange rate skyrocketed – 37% on the black market, the called “blue dollar”, and up to 34% in the financial exchange – due to the resignation of the now ex-Minister of Economy, Martín Guzmán.
In dialogue with the IMF, the new Minister of Economy, Silvina Batakis, did not touch on the 2.5% of GDP targets for this year’s primary deficit, monetary assistance to the Treasury of 1% of GDP and an increase in net international reserves of US$5.8 billion and, in front of investors, said he had the political support of all ranks of the ruling party. to balance public accounts.
Although the country risk has yielded above 2.600 basic points, the uncertainty does not decrease, since the government is evaluating a possible replacement for Minister Batakis.
“It would be necessary to go to very specific announcements that the fiscal deficit is starting to fall now and that is what is difficult to do politically,” Tiscornia said.
“The government is not entirely convinced that it has to do this because it is politically expensive. We are in this kind of limbo of great uncertainty and that causes financial volatility,” added Tiscornia.