Cash, Ideology and the Golden Geese
The government made three decisions in recent days that in the short term won’t change anyone’s life, much less the urban middle class, but that can have potentially negative effects in the medium term. The Paraná Waterway was nationalized for a year, the concessions of the freight trains that today are in the hands of national and foreign groups were not renewed, and a new project for biofuels, at minimum controversial, will without a doubt be approved by the Senate and become a law very soon.
How many dollars will the Central Bank sell in the second semester?
In some aspects, the first half of 2021 was a blessing for the Central Bank after a stormy second semester in 2020. Although inflation rose, what keeps the authorities from batting an eye is not preserving the value of the Peso but running out of dollars. As was seen last year, when the FX spread crosses a certain threshold, the economy falls out of order and confidence evaporates. The second semester will be very different and the Central Bank could be forced to give up 1.5 billion dollars.
Without the “holy” soybean and the “solidarity contribution” the deficit would nearly triple
Tax revenues registered a 69% y/y growth in June, similar to the accumulated increase in the first semester (68.2% y/y). Both increases were well above the rise in prices (50% y/y in June and 45% y/y in the first 6 months of the year). These positive dynamics allowed the deficit to reach only 0.5% of GDP in the first half of 2021. However, if we subtract the effect of the rise in the price of soybeans, which allowed export duties to almost double so far this year, and the “solidary contribution” made by large fortunes, the deficit would have been 1.4% of GDP.
Activity: April and May down, but June picks up
With April’s data, economic activity accumulated three consecutive months of decline. In line with our forecasts, the seasonally-adjusted EMAE contracted 1.2% monthly. In year-on-year terms, the 28.3% growth is the product of the comparison against an extremely low base: in April 2020, the month with the strictest quarantine to date, the economy had collapsed 25.4% y/y. And in May the numbers will show a new drop. The first data for June points towards an improvement compared to May.
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