Sergio Massa, Minister of Economy, spends 7 hours meeting with the team after price increases reached 108.8% in 12 months
The Minister of Economy of Argentina, Sergio Massa, met with his team for 7 hours on Saturday (May 13, 2023), from 12:00 to 19:00. The meeting was hastily called to discuss a package of measures to curb inflation in the country. Several measures are under study.
On Friday (12.May) the inflation for April was announced: 8.4%. In March it had been 7.7%. The high price accumulated in 12 months is 108.8%. It is the biggest in 31 years.
INTEREST HIGH
One of the measures under discussion according to the newspaper La Nacional is to raise the basic interest rate. The president of the Central Bank, Miguel Pesce, attended the meeting at the Ministry of Economy.
The initial proposal on Saturday (May 13) was to raise the rate to 110% per year on Monday (May 15). But the La Nacional reported this Sunday (May 14) that the new level of the rate should be below 100%.
The most likely, according to the Argentine newspaper, is 97%. Therefore, the basic interest rate would remain negative, below inflation. It is currently at 91%.
ZERO RATE FOR FOOD
The government also intends to eliminate tariffs for importing food from some merchants who sell directly to the population. This would include merchants in the Mercado Central of Buenos Aires, the capital of Argentina.
The idea is that competition from these merchants will result in limiting the rise in food prices in a broad way.
ACCESS TO DOLLARS
One of the objectives of the Argentine government to contain the crisis of confidence in the economy is to have financing in the currency of other countries. This would prevent the erosion of international reserves.
Low reserves make economic agents buy foreign currency, in general, US dollars. This devalues the Argentine peso against other currencies. It makes imports more expensive and puts pressure on inflation.
Argentina’s reserves stand at US$34 billion. Those of Brazil, at US$ 346 billion. But the contrast is not only in value. Unlike other countries, there is a lack of transparency about the liquidity of Argentine reserve assets. Part of what Argentines have are assets with low liquidity. They cannot be quickly turned into cash.
Massa will travel to Beijing on May 29. It will seek to obtain from the Chinese government greater access to financing that will allow it to increase the country’s reserves or postpone the payment of imports.
The Argentine government is also seeking to advance the release of a US$ 4 billion loan from the IMF (International Monetary Fund).
BRAZILIAN AID
The President of Argentina, Alberto Fernandezvisited the president Luiz Inacio Lula da Silva (PT) on May 2 in search of an increase in funding from the BNDES (National Bank for Economic and Social Development).
The main focus was on exports and Brazilian products and services for the construction of the Néstor Kirchner gas pipeline. There is an expectation from the Argentine government that Brazil can finance the sale of other products to Argentina. Thus, the country would depend less on the disbursement of foreign currency.
PROBABLE CANDIDATE
Massa presided over the Chamber of Deputies from 2019 to 2022. In July 2022 he was chosen by Fernández as Minister of Economy. His mission is to control inflation without causing unemployment and a drop in economic growth.
He is expected to be the ruling coalition’s candidate in the October 2023 presidential election. Fernández will not run. Experts estimate that it will be difficult for the current Minister of Economy to win the election because of the difficulty of controlling prices.
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