Editorial: A Small Step
The Central Bank announced last week a marginal loosening of the capital controls for exporting companies. Those who have increased the exports in 2021 compared to 2020 in the industrial, oil and gas or mining sectors will be able to access the FX market, but with limits. Depending on the sector, the firms will be able to access to a sum between 5 and 15% of the total increase. In other words, if someone increased exports by 20%, they will be able to buy dollars for the equivalent of 1, 2 or 3% of exports. That money can be used to pay off debt or dividends. This represents a small increase in profitability for the exporter, a kind of cross-subsidy.
Soy Allows More Fiscal, Monetary and FX Space
When on September 22, Minister Guzmán presented the 2021 budget with a deficit for the National Administration of 4.5% of GDP, the price of soybeans was 375 dollars per ton, the Private M2, a monetary aggregate that adds cash holdings and short-term deposits (checking accounts and savings accounts) grew at 92% year-on-year and the blue-chip-swap FX spread reached 96%. Today, the panorama is radically different: the “weed” is above 560 dollars per ton (+49%), the amount of money grows at 30% (-62 pp) and the spread is at levels of 76% (-20 pp). And the deficit? We’ll see.
World Inflation Heats Up: Permanent or Transitory?
When Donald Trump nominated Jerome Powell to head the Federal Reserve in November 2017, a cartoon that compared the height of previous central bankers and the Fed Funds rate quickly went viral on social media. Paul Volcker, who was over 2 meters, raised it to 19% to end stagflation; after the 1987 crash there was some relaxation under Alan Greenspan (1.8m). In response to the financial crisis, Ben Bernanke (1.72m) brought it below 1% for the first time. Janet Yellen had to start adjusting rates from 2014, but the average of 0.43% during her tenure is consistent with her shorter stature. The joke was that with unemployment already at 4.1%, pre-2008 levels, Powell’s 1.82m heralded a cycle of rate hikes. This premonition was initially met, with an increase of 1 point throughout 2018 that, among other effects, cost Argentina dearly. But already in 2019 he was more reticent, and in the face of the pandemic he adopted a radically more expansive monetary policy than any of his predecessors. The Fed’s balance sheet grew from USD 4.14 trillion in January 2020 to almost 8 trillion today, increasing its holdings of Treasury securities by 118%, reaching USD 5.1 trillion.