Editorial: The Paris Club and the Fund: Parallel Lives
Argentina is trying not to default with the Paris Club. That is good news because it implies that at the end of the day there is an interest in maintaining a certain reputation. The agreement with the Club is not easy. It does not have the institutional framework of the Monetary Fund or the World Bank. It is not in fact a multilateral body.
Bad News: Inflation Is Not Slowing Down
Last week the INDEC released April inflation data and set off the alarms. Monthly inflation was 4.08%, in line with our forecast (4.0%) but above market expectations (3.8%) and, of course, the government itself. Although the record was lower than that of March, it was the highest value for an April since 2016, when energy rates were abruptly adjusted. Core inflation was even worse than expected: 4.56%, against a market expectation of 3.9%. With these numbers, annualized inflation taking the average of the last 3 months reached 63.0% for the headline and 67.4% for the core. Minister Guzmán’s 29% annual target is just wishful thinking, impossible to come true.
How do Wages Arrive to the Midterms?
Martín Guzmán presented the 2021 budget with an inflationary pattern that indicated that the price increase throughout the year would be 29%. With that target in mind, the government’s economic policy got ready to “coordinate” with the unions the salary increases so that there are no deviations from the proposed objective. After eight months it is clear that the guideline will not be met, or rather it will be advanced: at the current rate, the 29% proposed by the minister will be reached in August, just in the month prior to the midterms.