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We often underestimate what we possess, even if it’s very little. This behavior is frequently repeated. We assume we have inalienable rights that no one and nothing will take away from us. We perceive democracy as an unchangeable political system, a cornerstone of our daily life. Still, we fail to consider that political machinery, structured from positions of power, can exert a clear dominion over our quality of life.

Forty years may seem like a mere breath in history, but they also represent an eternity. They are an eternity because efforts have been made to live under the rule of law after a tumultuous 20th century and two decades of the 21st century, marked by influential powers always ready to intervene at their will, regardless of what the Constitution establishes, let alone the well-being of the population, only their own.

On October 30th, 1983, millions of Argentines headed to the polls to elect a new president, ending a decade of dictatorships. Raúl Alfonsín was responsible for charting the path we are still barely traversing despite inconceivable governments and stumbles.

It’s a path we should never deviate from, but it seems the population has not understood that it is not moving in the right direction.

The Argentine political landscape looks like a shipwreck amid a storm. Recent election results leave no room for doubt: the population desperately seeks solutions to their problems in an economic and social crisis context that seems to have no end.

Uncertainty hangs over the country like a heavy burden, and political action appears to be an endless tragicomedy. Argentine political leaders, or the puppeteers pulling the strings from the shadows, have pushed the country to the brink.

The population has been anesthetized and subjected to the whims of a woman with likely many mental issues but very astute at forming a formidable power machinery, with only two or three pawns and many well-paid soldiers.

In a country that could have been prosperous, we may have to endure even darker years than the ones we are currently living. Years of social fabric rupture frustration, and everything becomes even worse.

Corruption runs rampant, justice disintegrates before our eyes, while a new royal family, the Massas, rises on the horizon. Welcome to the Argentine nightmare.

In the complex Argentine political landscape, maintaining an equitable division among candidates once the two leading contenders for the presidential elections on November 19th have been defined may seem laughable, considering the shadowy electoral manipulation machinery at play.

However, sadly, this idea becomes something bordering on the absurd when one examines the political context in which we find ourselves.

The results of the recent primary elections painted a bleak picture: Massa, Milei, and Bullrich, in that order, gathered 90% of the favorable votes amid a 77.6% turnout of eligible voters, the lowest since 2007.

But what indeed demonstrates that more than a third of the population, the most impoverished and subjugated, combined with hundreds of thousands of state parasites, is the surprise caused by Massa’s rise to the top, despite this election marking the worst performance in the history of the unified Peronist party.

To understand this phenomenon, superficial explanations have become a daily occurrence. The most impoverished voters are blamed for not knowing how to exercise their voting rights, and the ordinary citizen is accused of complicity in corruption. However, the reality is much more sinister. Institutionalized corruption is gestated in the highest power circles, while the most vulnerable are used as pawns in a perverse game.

Residents of impoverished municipalities like Lomas de Zamora and La Matanza can see how their local leaders enrich themselves at the expense of their suffering. Still, the disquieting question is how this corruption remains unpunished in legislative and deliberative levels that have shared political spaces for decades. Answers are hidden in the shadows of a decadent power.

The opposition has proven to be a monumental failure. Instead of capitalizing on their resounding victory in 2021, their leaders have become embroiled in internal conflicts and public disputes that have only eroded the public’s confidence in the possibility of real change. Milei, on the other hand, has succumbed to his vanity and abandoned coherence in his discourse, taking his campaign to an unprecedented level of absurdity.

In both cases, the supposed political leaders, who once promised solutions, have become puppets of a power machinery responsible for the misery and degradation of the country. Meanwhile, the Argentine people witness an endless tragicomedy where empty promises and childish speeches are the order of the day.

The future appears uncertain, and the challenges are monumental. The Argentine population is trapped in a downward spiral of despair and disillusionment. Only time will tell if political leaders can break this vicious cycle or if the nightmare continues.

The market experienced mixed behavior after the surprising election results on Sunday. On one hand, the pressure for dollarization decreased, but on the other, there was a collapse in bond and stock prices.

During the first few weeks of October, the prices of alternative dollars experienced a significant increase, along with the gap between these and the official exchange rate, as well as Rofex futures.

There was also a decrease in peso deposits and the withdrawal of dollar deposits by the private sector. These movements resulted from the fear of potential dollarization under Milei as president and increased public spending during rapidly declining peso demand.

The outcome of the presidential elections on Sunday changed the landscape and reduced the chances of the LLA candidate in the runoff, decreasing the probability of dollarization in 2024. This new scenario relieved tension in the foreign exchange market, and the gap decreased by 30 to 70 points, although it remains at record levels.

For example, the unofficial dollar and the CCL dropped from $1,100 to $990 (-10%) and $860 (-22%), respectively. Dollar futures contracts for December 2023 closed at $608 this week, compared to $820 on the day before the elections.

The stock market reacted very differently. There was a widespread drop in local stock prices, with losses of up to 25% in some assets, and the Merval Index closed 18% below its peso value before the elections. Additionally, sovereign bonds also experienced a drop in their dollar prices, increasing the country risk, which closed at 2,560 points this Friday, compared to 2,412 on October 20th.

These apparent contradictions are because the Argentine economy continues to face significant international scrutiny, and for good reasons. The macro economy has faced significant challenges regarding its domestic and foreign debt.

First and foremost, it’s important to highlight that Argentine debt can be divided into two main categories:

  1. External debt
  2. Internal debt The total debt, which includes the public sector, the Central Bank (BCRA), and the private sector, amounts to a staggering total of $276.201 million.

However, a detailed analysis reveals that internal debt, encompassing the public sector and the BCRA, is $116.798 million. This implies that the total outstanding debt amounts to a staggering $392.999 million, a staggering figure that needs to be managed effectively.

An exciting aspect of the Argentine debt situation is the disparity in interest rates applied to external and internal debt.

External debt is characterized by relatively low interest rates, reducing the interest cost for the public sector by approximately 3.3% annually.

However, in the case of the Central Bank, interest rates are considerably higher. In contrast, internal public debt is subject to notably high interest rates in pesos. Some domestic public debt adjusts for inflation, while the BCRA’s debt is subject to an astonishing 133% annual interest rate.

This scenario of dissimilar interest rates creates a dilemma in terms of debt sustainability.

Argentine debt could be considered manageable if the country could regain access to international credit and refinance this debt in the future. However, this recovery of global credit access urgently requires the country to achieve a fiscal surplus.

Currently, the Treasury’s cash flow result shows a deficit of 4.5% of GDP, with a projected future increase to 5.8%, considering the possible rise in interest rates. Therefore, it will take a long time before the country achieves a fiscal surplus sufficient to operate somewhat normally.

The lack of an adjustment of this magnitude could have devastating consequences.

Without a 5.8% adjustment, there is certainty that the Argentine government will be forced to default on its debt obligations since the debt maturities are significant, and the Central Bank’s gross reserves do not exceed $25 billion.

Implementing a budgetary adjustment becomes an option that could prevent contract violations and allow a reversal of the current economic situation.

In contrast, the lack of a dramatic budgetary adjustment that Massa cannot make promptly could lead to unforeseen situations where property rights violations could be closer than one might think.

The arrival of a new government on December 10th, 2023, regardless of who emerges victorious and their decisions, will significantly change Argentina’s economic situation.

The uncertainty surrounding this political event has become critical in economic and financial decision-making.

Economic actors must prepare for these events, whether investors in public bonds with holdings in pesos or dollars, inside or outside Argentina. We are less than 18 days away from the elections and 29 days from the new government’s inauguration.

The adrenaline of economic agents is at its peak in an economic environment that demands informed and cautious decision-making.

The Argentine debt situation presents a complex economic puzzle that requires a thoughtful and coordinated solution. Access to international credit and effective debt management are crucial for Argentina’s financial future, and the decisions made in the coming months will have a definitive impact on the quality of life in the country and its position on the global stage.

This situation results from an Economic Disaster Forged by Massa and the Ruling Party.

The population arrived at the elections with their economy on the brink of collapse. Uncontrolled inflation, an overvalued exchange rate, a constantly increasing deficit, a lack of foreign currency, and a 190% exchange rate gap are just some of the country’s imbalances before the primaries, and the government’s electoral plan contributed to deepening.

Determined to reverse the outcome of the primaries, the Minister of Economy and official candidate, Sergio Massa, stole another person’s wallet: the state’s and bet on distributing it to various sectors, with measures that imply a fiscal cost of over 1.2% of GDP. He succeeded but at the cost of the poorest citizens through almost immediate inflation—an unforgivable blunder.

The measures included a bonus for the unemployed and informal workers, increased support for a group of retirees and pensioners, and additional payments for social program beneficiaries.

These decisions, which imply increased spending, were combined with fiscal reliefs, especially in the 21% refund on debit card purchases and changes in the income tax for salaried workers.

All of this has not only led to an increase in the fiscal deficit for this year, which has buried the agreed-upon target with the IMF, but also anticipates a fiscal hole for 2024. The opposition candidate, Javier Milei, or Massa himself, will have to deal with this when one of them takes the Casa Rosada.

Changes in VAT and income taxes have increased the projected deficit for 2024 by approximately 1% of GDP, in addition to increasing the level of issuance and further damaging the Central Bank’s balance.

The country has been in a dangerous position with a Central Bank with depleted reserves and a distorted foreign exchange market. The devaluation decided after the defeat in the primaries was not enough to contain inflation, resulting in a growing exchange rate gap at alarming levels.

The undervaluation of the official exchange rate has generated a price spiral, with inflation accelerating alarmingly. The Consumer Price Index accumulated a 26.7% increase in just August and September, and it is expected to end the year above 180%. Furthermore, the government has lost reserves in a desperate attempt to support financial dollars, costing around $2.3 billion in reserves.

The distortions generated by Massa’s policies include frozen public utility tariffs, transportation, and fuel, which have deepened relative price distortions and affected the sustainability of tariff frameworks.

The accumulated subsidy spending has recorded an actual decrease of 16.6% year on year in 2023. The lack of adjustments in energy rates and other freezes has led to shortages and gas station closures, increasing the risk of an inflationary spiral, much to the anger of a large part of the population.

Finally, Massa’s package of measures has buried the agreement with the IMF, which has increased spending, issuance, and frozen tariffs.

The country has not met the agreed-upon targets, and now it is uncertain if the next disbursement will occur. Argentina needs a reconstruction of its relationship with the IMF, but it’s more of a political problem than an economic one. Massa and the ruling party have forged a financial disaster that will be a heavy burden for the next president taking office.

This could reflect the market’s perception that, after the election results, the chances of a successful stabilization plan in 2024 are lower, regardless of who wins in November. The likelihood of a disruptive debt event in the next year increases despite the fiscal consolidation that could take longer than expected, despite the minister’s announcements.

In the next three weeks, the minister and candidate Massa will do everything possible to ensure the economy reaches the runoff without significant turmoil, focusing on containing exchange rate pressure and rising domestic prices. To achieve this, one of the key objectives is to maintain the official exchange rate fixed at $350, which involves a covert devaluation. They will also continue to adjust to demand, especially regarding imports.

Regarding inflation, the risk of a price escalation in November appears to decrease, with factors in favor like the fixed official exchange rate, lower volatility in alternative markets, and increased compliance with price agreements by companies. However, the hidden devaluation, growing import restrictions, and inflationary inertia will continue to exert upward pressure, likely resulting in double-digit monthly inflation for the rest of the year.

Despite the temporary calm after the elections, the economic situation remains highly critical, with persistent macroeconomic imbalances, high inflation, an undervalued exchange rate, and a desperate fiscal and monetary situation.

The next president will face a challenging scenario, both in economic and social terms, and will have to weave agreements in a highly fragmented Congress to advance necessary reforms, with optimism waning for 2024