Argentina’s Central Bank Move Raises Inflation Concerns

[MilHojas]

Argentina’s Central Bank Move Raises Inflation Concerns

(Bloomberg) -- A measure allowing Argentina’s commercial banks to move part of their reserve requirements from central bank notes to treasury bonds is raising concerns about inflation and the financial system’s health.The country’s central bank said late Thursday that the move is intended to...

finance.yahoo.com

 

[camberiu]

Great news for all expats who have income in hard currency. For everyone else...prep the lube, cause you are about to take it on the bonghole big time.

 

[sts7049]

this govt is disgusting

 

[toongeorges]

The government wants money

Alberto's trip to Europe failed to convince other countries to reduce the IMF debt, getting dollars is hard.

The private pensions were already nationalised and spent under Christina I in 2008

We still have the money of Argentines on bank accounts. Let the banks buy government bonds with it, so the government can spend it well. Who wouldn't trust Argentine government bonds?

 

[antipodean]

The government wants money

The government needs money.

It likes to make expensive promises and hates compromise if that could cost votes or hurt its ego. Perhaps worse, it is simply has more dollars than sense when it comes to administering it and getting value for money meaning "concern" about more inflation is hardly news.

Let's look the 2021 budget of approx US$84.000.000.000:

• Government administration - A$467.358.012.102 // US$4.673.580.000
• Defense and Security Services - A$303,046,817,039 // US$3.030.468.000
• Social services - A$5,565,714,840,906 // US$55.657.148.000
• Economic Services - A$1,393,836,194,219 // US$13.938.361.000
• Public debt - A$665,038,960,784 // US$6.650.389.000

Now lets looks at some of the costs it is racking up:

• "Anchoring" the dollar to reduce the brecha - estimated US$700.000.000+
• Subsidies for Aerolineas Argentinas - US$700.000.000+
  • This doesn't include the subsidies like ATP/ REPRO paid by ANSES directly to their employees, significantly reducing their payroll costs or the removal of employer contributions until 31DEC21
  • The subsidy amounts are 40% more than their total sales
  • Let's also not forget that there is LADE (Lineas Aereas del Estado) offering essential air connections to remote communities paid for exclusively by the state and private low cost airlines now serving most of the same destinations served by Aerolineas without subsidies
• Tarjeta Alimentaria just to feed 4.000.000 children who would otherwise starve - US$300.000.000 per month
• Scrapping income tax for all employees who earn under A$167k monthly in 2021 - US$476.000.000
• COVID relief (authorized so far but already exceeded) - US$1.650.000.000
• Vaccines - US$613.000.000
  • Budget already x4 higher than original after purchases of more expensive vaccine products and by March 2021 government had already spent 50% of budget on the 4.000.000 doses that had arrived by then (e.g. $20 Sinopharm vs. $4 Astrazenaca)
• Public works projects announced for 2021 - US$21.000.000.000
• Cost of price controls - unquantified - due to reducing the amount of IVA and other taxes the state can collect vs. its costs subject to inflation.
• Cost of meat export bans - unquantified - due to reducing the amount of taxes and FX the state can collect.
• Cost of other damage done to private sector due to various policies and erosion of confidence undermining investment and employment - as above.
• Natural cost of COVID restrictions, infections and fear - unquantified - as above.

On the other hand, Government moves like this in the financial system that are just aimed at trying to kick the can down the road and buy some time. They can easily trigger a banking crisis in their wake. Perhaps the last missing ingredient for a perfect storm?
Would be interesting to hear the take of those inside the banking system here, if anyone?

 

[toongeorges]

The government needs money.

You seem well informed, where do you get the information from?

The 7.500.000.000 USD subsidy cost for cheap energy is under social services or economic services? (This amount is mentioned at https://www.cronista.com/economia-p...ormacion-para-segmentar-tarifas-de-luz-y-gas/ )

This government, like governments elsewhere seems to be addicted to spending more than what it receives. What I feel is different though is that in other countries, governments spend to improve the economy and increase the tax revenues, while in Argentina money mainly seems to end up in non productive subsidies. Government finances here look like a black hole, feeding of the economy and incapable of improving it.

 

[antipodean]

You seem well informed, where do you get the information from?

The 7.500.000.000 USD subsidy cost for cheap energy is under social services or economic services? (This amount is mentioned at https://www.cronista.com/economia-p...ormacion-para-segmentar-tarifas-de-luz-y-gas/ )

This government, like governments elsewhere seems to be addicted to spending more than what it receives. What I feel is different though is that in other countries, governments spend to improve the economy and increase the tax revenues, while in Argentina money mainly seems to end up in non productive subsidies. Government finances here look like a black hole, feeding of the economy and incapable of improving it.

The budget breakdown can be found in the bulletin oficial and information on program costs is routinely covered in other information sources like Chequeado and the financial papers like Cronista as well as ministry of economy pages...which are even better informed than I! ;-)

Personally I have nothing against the concept of energy subsidies for those that need it - I am actually proud that Argentina has a system that in theory gives access to the basics to everyone. But I don't see why my monthly Edenor bill comes with a big "Consumo Con Subsidio Del Estado Nacional" written across it (as they did 7 years ago) when I (like millions of others) have the means to pay full price, even if I won't like that or would rather spend that money on brunch, sweet-treats, vacations, wine or clothes...

Perhaps putting all those state employees to work (which already cost a few billion anyway) doing means testing and formalising the economy would result in chopping billions off that energy subsidy, amongst the others.

Or perhaps it is just easier for an inept or clientelista government to harp on with rhetoric like it's the $6bn spent on servicing public debt that is the real problem facing government accounts rather than aggravating millions of swing-voting middle and working class supporters?
Or perhaps even more cynically, with more things to spend money on, there are more opportunities to steal it without anyone really noticing its gone.

 

[Iznogud]

...
Or perhaps even more cynically, with more things to spend money on, there are more opportunities to steal it without anyone really noticing its gone.

DING! DING! DING! We have a Winner!!!!

Iz