What can be expected from the Multiannual Economic Program?

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Presidency of the Nation

This announcement was initially well received by investors in the bond market on Monday after the election, where the Globals experienced interesting rises in anticipation of beginning to define an economic program that aims to correct macroeconomic imbalances. We consider positive the fact that the economic program is finally sent, a necessary condition to start thinking about an agreement with the IMF. We emphasize that the agreement should be closed during the first quarter of 2022 given the large maturities due to u $ s19 million to be paid in 2022.

We also remain constructive that an agreement is finally reached based primarily on the fact that a “I don’t agree” It would imply exacerbating current macroeconomic imbalances, especially those associated with nominality. dice that not agreeing would entail both a fall in the demand for pesos as well as notable difficulties in obtaining an adequate rollover of the debt in pesos, with a challenging first half of 2022 in terms of maturities.

With the announcement already made, it is worth starting to imagine possible pillars of a potential program with the IMF, considering the main macroeconomic imbalances and taking into account the current social situation in the country. In this sense, the path of fiscal consolidation probably lacks structural measures at the tax and social security level and possibly focuses on subsidy reductions via tariff segmentation and an increase in tax pressure, although the margin is limited given the current high taxes. .

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Alejandro Goldemberg-Guido Beck

For its part, inflation would no longer be addressed through an exchange rate anchor, so limits on transfers from the Treasury to the BCRA, positive real rates and aggregate targets could be part of the menu. Finally, on the foreign exchange plane, a reduction in the gap between the different exchange rates will surely be sought, with an acceleration of the wholesale exchange rate together with less restrictions on the operation of alternative exchange rates. What’s more, there are probably reserve accumulation goals.

We believe that the implementation of a program will require consensus: both within the ruling coalition, as well as with the IMF and with the various opposition forces. Thus, and with the first quarter of 2022 as the period in which the agreement should be closed, We believe that an increase in volatility could be seen, given the uncertainty regarding both the content of the program and its viability to be fulfilled over the years, something that was evidenced during the week with strong falls in equity and bonds that corrected Monday’s rise.

In this line, we believe that investment options that protect capital against nominal stresses (inflation and exchange rate) could be a good alternative while riskier profiles could see value in the penalized valuations of bonds in dollars and stocks, which should be favored in the event of an agreement that allows a path of stabilization of macroeconomic variables to be started.

SBS Group Economist.

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