Argentina: Budget 2019 and Public Debt "The income of the usurer is the perpetual servitude countries"

Hector report Giuliano (1) At a time when the National Congress is debating the Budget project 2019, whose structure is armed to meet the demands of the IMF, We reproduce an extensive report by Mr. Héctor Giuliano. This specialist in finance and public debt is the author of a very rigorous investigation on Argentine public debt.

Socialist alternative: What are the country's debt mechanisms??

Hector Giuliano: As a starting point I will explain this to you.: people don't understand, It is not even explained, What is the underlying problem of public debt?.

What is the perpetual debt trap that Argentina has fallen into and from which it cannot escape??

I sum it up this way: The logic of the usurious lender is not that the debtor returns his money but that he can never return it.. Because the income of the usurer is the perpetual servitude of the countries. This applies to a person, a company, a state..
So the key, and this is the debt system in which Argentina lives, is that since 40 years without continuity solution, since 1976 to date and with the change of all governments, The logic of this debt system remained the same: taking on debt without the ability to repay, I pay more and more interest, impossible to rescue capital. I consequently live paying interest while refinancing every penny of principal and continuing to take on more debt.. And they still congratulate us because we got into debt.
They trust us because they lend us a debt that we cannot pay and the interests grow more and more. These debt cycles that are financial cycles equivalent to economic cycles. A first stage of slingshot is coming: “Guys, go into debt and international rates are cheap.”, There is an excess of financial capital in the world!!”.
But there comes a time when a turning point occurs., I can't pay more interest. At this moment, not only does Argentina not pay a cent of capital, refinance every penny of maturing debt. Take on astronomically more debt, priceless, and pay more and more interest. seizing the cannons that the people themselves have paid for by subscription 20 O 30% You cannot pay that interest.. Capitalizes them by anatocism.
Anatocism is compound interest. You finance the interest that you cannot pay. You capitalize on it.. That is to say, the logic of usury is fulfilled., the interest of the interests. It's like you have a credit card, You can't even pay the fee for the tapas, but you cannot pay the interest they charge you on that fee either.. Then the bank graciously takes and finances the interest. Well that is happening with Argentina.
And at this moment public interest spending is the main state expense. More than the net of retirements, because that clarified it because more than once it gives rise to confusion, because it is true that the pension expense is much higher, it is 1 billion 300.000 millions of pesos. But be careful that pension spending also has its income., of contributions and contributions. When you do the math, the net pension expense is left to you. 400 billion pesos, which is no small feat from now on, for next year's budget.
But you have to pay debt interest 750.000 millions. Almost double. For debt interest only, not for capital

AS: When you talk about debt, Are you talking about external debt or public debt??

HG: Let's clarify the difference. We must talk about public debt. The public debt is the one borne by the central state, And be careful, there is a very important restriction here., When we talk about public debt we only talk about the debts owed by the central State., of the National State, of the Macri government. Here we are not putting the debt of the provinces, municipalities, state companies, national organizations, trusts, Central Bank – which is a separate account – nor lawsuits against the state lost with a final sentence.
The national public debt that would be the sum in these different areas is not known, it's secret, no government informs it. We do not know how much Argentina owes. The only thing we know is how much the central government owes. The government reports it in installments and with quite a delay. For example, The latest data we have from the Ministry of Economy is the debt to 30 June of this year: 340.600 millions of dollars, what is public debt.
Now your question. External debt is the debt contracted with residents abroad.. When the total public debt is given, care must be taken because one part is the total public external debt of the state and another part is the private external debt of companies.. At this moment – ​​according to INDEC figures 30 June of this year – the stock of external debt is 261.500 millions of dollars, of which 181.000 are Public External Debt and the 103.500 remaining is Private External Debt, of companies and/or banks that have taken on debt abroad.

AS: Do they have a state guarantee?

HG: They do not have it directly, but they do have it indirectly, because since it is debt contracted by companies that are in Argentina and operate in pesos, but they have to pay it in foreign currency, If the government devalues ​​a lot, how is it devaluing?, The problem arises as to whether the government does not have to compensate the exchange difference..
This was the famous negotiation that took place in the year 1983/85 when the Alfonsín government. Cavallo raised it when he was president of the Central Bank at the end of the military government, of the Bignone government, but the radical government formalized it, with Machinea at the head of the Central Bank. The transfer of private external debt to public external debt was accepted, because there had been a macro devaluation involved. And then the companies - almost 1000 Business- They benefited from the state assuming the exchange difference. Among them Macri's SOCMA group, which at today's values ​​I think could be around 800 millions of dollars. It was the scandal by which the government transferred private external debt to public external debt!!
But back to your question, The most important thing is not to confuse external debt with public debt. The public debt of the state can be internal or external. If the state places Letes here it is internal debt, but if you place as you did with the 9 billion Caputo in January, on the New York Stock Exchange, then it is external debt.
Total public debt, only at the head of the Central State latest data, 30 June of this year, like i said: 340.600 millions of dollars. and external debt, on the same date 261.500 millions, of which the vast majority is public external debt, some 181.000 millions.

AS: To that consolidated debt 30 of June, We must now add the loan with the IMF and the transfer from Lebacs to Letes?

HJ: Exact, I was saying that Debt figures are always reported with a time lag. Note that we are in November and the government has just reported the data to the 30 of June. Here they are now 15.000 million from the IMF but it is not clear how much the rest of the debts contracted to date amount to (new Letes and Lecap case, Multilateral Credit Organizations such as the World Bank, the IDB and the CAF, and the new IMF disbursement). I estimate that at this moment the debt stock may be around 370 million dollars but the estimates are confusing because as a result of the strong devaluation the government is liquidating the debt in pesos and therefore a part of the total debt is “decreasing” when expressed in dollars (with the important clarification that this debt that is being liquidated is almost all intra-State Debt).
Indeed, two large loads of debt came. First the disbursement of the monetary fund, 15 billion dollars, and then the Lebac transfer program from the Central Bank to the Treasury. Which means that the debt that was in another account, because the Central Bank is a separate account, starts to go down and what starts to go up is the Treasury debt because it is being absorbed.
That's where you told me about my article since I had been warning about it in April or May., because be careful with the topic, a devaluation was taking place. You have the debt of the Central Bank in Lebacs in pesos and one can say, Well, I discharged the debt from the Central Bank and transferred it to the Treasury. Yeah, but the Treasury takes it in dollars! Which means you are doing the most irrational thing you can do in a moment of crisis.: You have a debt in pesos and you are dollarizing it.

AS: Would inflation liquefy it??

Of course inflation is liquefying the debt in pesos. But precisely so that the forks are not damaged, The government ensures that the debt is dollarized or in adjustable pesos with an exchange rate clause.. What does this mean?. This means that if the peso is devalued against the dollar, this debt is adjusted by the exchange rate., which is the same, is to dollarize the debt. Nothing more than contributed in pesos and computed in dollars.

AS: This tentative debt increase figure that you mention?, does not yet contemplate the other disbursements that the Fund has to make with the agreement, but what he already did?

Clear, this taken according to what is perceived, what was really spent. But now that the new agreement has just been agreed, by which the number of 50.000 round to 57.100 millions of dollars, Not only is the amount increased but disbursements are brought forward. In such a way that in the year it is planned that the Monetary Fund will disburse them 13.400 millions more dollars and for next year another 22.800. Total 51.200 millions of dollars (counting the 15.000 already turned in June), between this year and next.

AS:Are there others left for him? 2020?

HG: For him 2020 there are some left 5.000 a thousand or so remaining (that in reality could only be disbursed in the 2021). It means that specifically, and this is the great mockery that I see and that has a political implication, This Macri government needs the money from the Fund to complete its mandate – because they said so:“this is what we need to get to 2019” – all the money is going to be spent and the next government is going to have to pay for it. This is a surreal thing from my point of view. You have to be very attentive. These are things that I have been observing, I analyzed facts, I do not make conjectures, but this is a reality. The political opposition has to give support to the government with the budget in Congress 2019 and it turns out that the budget is made in the image and likeness of the demands of the Monetary Fund. This means that whoever approves the budget validates all the numbers in the agreement with the Fund..

AS: Clear, The zero deficit is actually a big adjustment for workers…

HG: The budget 2019 with its adjustment it has a great equation for me. The equation is that an adjustment must be made on the fundamental basis of the decline in real wages in order to be able to pay more interest.. Because interests are growing in an astronomical way. The central government with the Treasury bills that it is placing, He is placing them between the between 50 Y 55 % annual interest. It is financial brutality!, and the Central Bank worse, is placing them 70%!. There is no public or private economy that can withstand this cost. It's a financial strangulation. No country in the world pays the extraordinary rates that Argentina pays. Our country is the financial paradise of the world.

AS:They say that if they don't do that the dollar would skyrocket?

HG: First and foremost, that interest rates rise to contain the dollar, Yes... but I always say that you have to understand the underlying financial problem. Let's see if I translate it well for you.. There are three key financial variables that are related to each other: the exchange rate, interest rate and inflation.
They are interrelated because if inflation is high, the interest rate is also high., or reciprocally, If the interest rate rises, it also affects prices.. And the exchange rate plays against the interest rate. The sea, that all this mixture exists. But the question I ask myself is:Which of the three variants rules and why??. Since it took office, this Macri government has a formal premise, govern with debt.
Although it has not been formulated in these terms, this is the only reality. Because the government has started from the basis that it had a fiscal deficit and it was going to cover the fiscal deficit with debt.. The sea, It's like the home economy: you have more expenses than income, You cover the difference that is the deficit by borrowing and not by printing money.. This was the government's great argument and it continues to support it until now.:“We have to go into debt to not issue money”. This has a very big conceptual trap. Because if necessary, if I issue money it is cheaper than taking on debt., because the money I issued did not pay interest, instead for the debt yes. And furthermore, I give rise to an entire institutional financial negotiation because the debt is lent by large international financial capitals, What are those who have caused this crisis?.

AS:How much do you estimate capital flight??

HG: With this crisis, the data that has been thrown away, although they are not official, is that the Central Bank so far this year has sold some 40 billion dollars. Of which it is assumed that the vast majority left the country. Others may be stored, as they say, in safe deposit boxes., on the mattress, whatever... but the data as of July passed the 30 billion. With this particularity, let it come in 14 Y 15 one billion had already left before the April crisis. and the 10, 15 remaining thousand left after the disbursement of the Fund. Therefore there is a very serious irregularity which is the following: that Caputo, who was in charge of the Central Bank after the looting that was done under the Sturzenegger administration (when the Lebacs snowball), during his 100 days of Caputo management, the 15 billion dollars lent by the Monetary Fund entered through one window and were sold through the other.
Under Caputo's management, the Central Bank sold $16 billion to the market and received 15.000 of the Monetary Fund. The sea, all the money was spent on supporting the exchange rate. This is capital flight. We are asking the Monetary Fund for money to sustain capital flight. It's a scandal, It is a quasi-criminal act.!.

AS: The carry trade business was already criminal…

HG: It's just now reproduced. That's why I talk about the three variables.. The variable that controls is the exchange rate, because as of the total public debt that the government has, 75%, three quarters of that debt is in foreign currency. Then the big dilemma arises.. The state collects in pesos. You have to reconvert those pesos into foreign currency to be able to pay, not the debt but the interest on that debt. Consequently, what the government is concerned about is having a stable dollar, as late as possible, so what I charge in pesos I can sell it or convert it into more dollars.

AS: You were telling me that the debt services in the budget were valued at 700 billion pesos?

For next year 2019 it is 750.000 million pesos at a dollar value of around $ 40. It is equivalent to about 19 approximately one billion dollars. But interests have been growing and this is not very clear now. Mira, expressed in dollars in the year 2016, Argentina paid some 10 billion dollars of interest. At 2017 the number rose to 14.000. This year they were planned 21 billion dollars and for next year they were “piously” talking about 15.000. But I say “piously” because with the extraordinary increase in interest rates to a 50% in pesos, a Letes capitalizable per month, the interest bill is skyrocketing astronomically. They no longer have much to do with the bill that the government has presented.

Therefore, it is not convincing that next year those payments will be made. 19 billion, which in fact are some 15.000 because the 4.000 remaining are capitalized by anatocism (some 160.000 millions of pesos). But 15 billion dollars – what are they 750.000 million pesos – it is the main item of public spending. The sea, while cackling about public spending, It is ignored that the main item of public spending and the main expenditure that causes the deficit is the interest on the debt..

As:But the interest is after the primary expenditure?

HG: In other words, the interest on the debt comes after what is considered the zero deficit.. There is a confusion there. Here when we talk about zero fiscal deficit we talk about fiscal deficit with primary spending. What is the difference? Primary fiscal expenditure is the expenditure that the government has in all areas, remunerations, consumption expenses, etc., including capital spending on public works, without counting the interest. When the interests of the total public expenditure are put for practical purposes, this is the deficit that is worth and is called the Financial Result., because it is your total debt. What you have to pay in total and what you need.
So, The primary fiscal deficit is taking the income and subtracting the expenses without computing interest. This is what you want to achieve 0 next year. It means that I have to tighten expenses and increase taxes enough to leave my primary spending balanced.. Because I have to pay more interest. So what is not said is that the primary fiscal deficit is going to be zero, because the total deficit is 600.000 millions of pesos, What are the interests that have to be paid? (the 750.000 less the 150-160 thousand that are capitalized by anatocism).

AS:on a national budget valued at how much money?

HG: It is in the order of three billion pesos in total (the current budget of the 2018). The sea, that the fiscal deficit – originally planned for more than 600.000 millions of pesos (now reduced in estimates to 400.000) – it would be a fifth of the total budget expenditure. We are talking about very high figures, figures very difficult to manage in practice. And pay attention to the issue because what was agreed with the monetary fund – as I said – is to reach primary fiscal balance!!
What does this mean? That income and expenses have to be leveled in order to be able to pay more interest that is computed later. Something like that, to put it graphically, Like you have a home economy and you earn well 100 but you spend 150 although, in brackets, those 150 What you spend is because of having to pay interest. You have a deficit left 50. You transform that into debt. In other words, you are capitalizing debt for interest. That is the perfect vicious circle of usury., because you have an unpayable debt.
That debt continues to grow. That creates more deficit. The deficit is covered with more debt. Debt produces more interest. So the fiscal deficit increases. And you cover that with more debt... And so on. This year 2018 They beat the country according to the budget 67 billion dollars of capital and not a cent of capital is paid. Every penny of capital that matures!, is refinanced and also takes 47 billion more dollars!
That what it means ? that when you see the budget, You see that this year's debt figure is going to be 113.000 millions of dollars. In pesos they are 2 trillion 200.000 millions of pesos, on average they are 6.000 million pesos per day. The minister of economy who has, be it Dujovne or another, every day it is renewing an average of $6.000 millions of pesos daily debt. But you don't pay the debt you refinance, what you pay is the interest. Good, The average daily interest is 1.100 millions of pesos. At the time the budget for the current year was made, that is, in October of last year, I did the calculation by show of hands: 1.100 million pesos per average day, It is equivalent to the financing of a fully equipped medium-complexity hospital. Ergo, what we pay in one day of interest would serve us to build a hospital. If you want I'll make it worse: If you lower it to an hourly average it gives you 46 million pesos per hour, almost 50. You have to build two and a half schools with what you pay in one hour of interest.

AS: What is the increase in the stock of debt in relation to GDP?

HG: GDP calculations are the most elastic there is. They range from 500 until the 640.000 millions of dollars. There is no good reference point… and I am talking about official figures. When you weigh the value in pesos, was in 10 trillions of pesos with the old exchange rate, I mean 640 billion dollars. It was a very high GDP. But now you devalued and you were left 350, 370.000 millions of dollars, there is no relationship.

AS: With the devaluation, do we have as much debt as GDP??

HG: Now we're quickly overtaking it, because before they boasted that the debt with respect to GDP did not reach 50%. They already recognize a 58% but at this moment it would be passing the 70% and speculation is that at this rate by the end of the year and the beginning of next year the debt-GDP would already be more than 100%. Because the debt is primarily in dollars and the GDP is converted from pesos to dollars. But there are no exact figures.

As: On whom is the adjustment of this policy discharged??

HG: It hits everything that is physical or real economy, especially what is a productive economy that suffers the impact of the financial economy. I always clarify that common people confuse because it is not explained to them that finance and economics are two different things.. They are governed by different criteria and logic. Because when you do a business, whatever, you take into account real factors,your investment, your market, your costs, etc.. On the other hand, when you reason financially, you do so by arbitrage between exchange rate gains and interest rates.. They are two different forms of reasoning.. The government through the debt system is imposing a total subordination of the physical economy to the financial economy. Because an interest rate of 70 a 74% annual is destructive for the economy for the simple reason that there is no more profitable economic alternative than putting it in Lebacs or Leliqs of the Central Bank.

AS: And yet this clearly recessive policy does not stop the wholesale inflation that is said to be the 55% accumulated…

HG:Well therein lies a trap.. We raise the interest rate to stop inflation, when the interest rate is also an inflation factor, as if the interest rate were neutral with respect to the market. On the contrary, I always say that it is one of the factors that hit the real economy the fastest and mercilessly.. Because let's be concrete, the merchant, the company, transfer those costs. The financial cost is the first that is transferred to the prices. If I am an SME or large company entrepreneur, I have a financial cost of the order of no less than 50%, If I want to take out a loan that is already stratospheric, yes I am going to deduct a check, If I am going to discount a document, they discount it to me 80, 90, until the 100%. That cost beyond how burdensome it is for the company and what it produces, the businessman transferred the prices. The sea, The interest rate is also a factor of inflation. That is why here we are facing a circular causation.
The government alleges – all the presidents of the Central Bank, now Sandleris, before it was Sturzenegger, Also Caputo – the whole discourse is that the Central Bank raises the interest rate to stop inflation, at the cost of recession. But still, apart from the cost, there are two traps at the same time. The first and main thing is that raising the interest rate feeds inflation, with which we are putting out the fire with gasoline. If I raise the interest rate and the interest rate is transferred to prices... then it will not help me stop inflation.
There it is revealed that the real reason for raising the interest rate is so that the pesos do not go to the dollar. They are two different things, because one thing is that I want to stop inflation, another thing is that it goes to the dollar. Because if the government stopped feeding that interest rate, the dollar would skyrocket, not only currency would go away, but in turn the devaluation is transferred to prices. And I believe that one of the dilemmas that this government has, in which you cannot get a foot on the ball is that. The Monetary Fund is putting pressure on the government to devalue, but at the same time control the transfer to devaluation prices. Because if it doesn't happen to you, how it happened to you in December of the year 2015, he barely assumed. do you remember? He made a macro devaluation of the 20 al 40%. At that time the crowing was the exchange delay of the Kirchner government, I think the dollar left 9 and peak to 14, more or less. But what happened? This devaluation was immediately transferred to prices. And the summer passed and in March 2016 we were back with an exchange delay problem. Clear, exchange rate delay means that you have a comparatively cheap dollar, and that's why people traveled abroad, they bought abroad, They spent with cards. All of this is not produced spontaneously by the market.. All of this is induced by the government.
Consider the following paradox: All these neoliberals crow a lot about the non-intervention of the state in the economy, but they are interventionists in finances, because they set a very high interest rate. That is governed by the state. You are calling capital to come attracting them with a high interest rate:“Come here, we pay you the highest rates in the world”. So that's from the state., that is state interventionism. One thing is that foreign capital, still speculative, enter to place yourself at the rate they pay in the current market, another thing is that it is the State itself, the Central Bank which pays these rates, the one who leads that financial negotiation. This is what the government has done. He came to govern with debt carrying the Treasury debt, in two and a half years of management, increasing it by 140 O 150.000 million dollars and the parallel debt of the Central Bank multiplied it by 5. Mr. Sturzenegger received a stock of Lebacs from 346.000 millions of pesos, that were already important in that era of Kirchnerism and led them to 1 billion 500.000 millions of pesos, That is, he multiplied it by 5. And Macri did that, It was no inheritance.

AS: is it now gone to Letes?

HG:He didn't even go to Letes. There was a change here that I am now analyzing.. The argument was actually that: the debt that is in the Central Bank, let's take it out to the Central Bank, let's pass it to the Treasury. Well, they are another government window but you end up paying the same.. In turn, the Central Bank raised the interest rate to 70-74%, but not satisfied with that it was worse. Because the Lebac snowball did not really disappear. He became Leliq who are Lebac to 7 days. The sea, We are worse because the government is transferring Lebacs from the Central Bank, which are on average 30 days and pay the 60%, and he is turning them into the Leliqs, what are Lebacs? 7 days and pay the 70%.

AS: So the financial instability is total??

HG: It's total. We are accelerating the maturity profile, We are transforming debt and that is in the Central Bank. You grab the weekly balance sheet of the Central Bank and you find that yes, measured in May and July of this year was 1 billion 300.000 millions. Now it would have descended 850 thousand. Yes, but when you go to look at what the composition is like, you find that of the 850, some 300.000 They have stayed in Lebacs but the others 500.000 or more, They are now at Leliqs. The sea, that you are strangling yourself financially. You are passing debt that pays a 60% average and is 30 days and you are turning it into debt that pays the 74 % a 7 days. So the financial business is enhanced, because those Lebacs reinvested every 7 days they give you a rate, what is called the effective rate, which is like a fixed term that you instead of withdrawing interest, At maturity you replace it with the interest amount,then you capitalize it. That, What is the effective rate measure?, passes the 100 %. Because of course, if the financial capital that has entered back is converted from dollars to pesos and placed in Leliqs, you are going to replace it every week, How are financial capitals doing?, you are sustaining crazy rates in Argentina.

AS: In other words, increasing the dynamics of the financial cycle that already existed?

HG: Yes, yes... with the aggravating factor that this was done by speculative investment funds friends of the government. This was led by Morgan Stanley banking, that begins with the departure of Lebacs going to dollars, which is what the Morgan bank did 25 last april, when in a single day the Central Bank sold 1742 millions of dollars. Most of them were bought by the Morgan Stanley Bank, which bought dollars and took them out of the country. At that time the dollar was $20.

AS: With this picture that you describe, is the country's economy going to explode??

HG: Some speculations exceed me. I believe that in the immediate future Macri is supported by the G20 meeting in November. This is what people linked to the government or Cambiemos say, who say it would be a huge mistake., that the political crisis is revealed to them at a time prior to the meeting of the much-mentioned G20. It is not known what may happen from December, but there has been speculation about Macri's resignation and the constitution of a coalition government to complete the mandate. Until now the international financial powers are banking and supporting him. If the Monetary Fund had not granted him a loan of 50, now 57.000 million dollars. What did President Macri dress up as?? Hence, the government's entire financial and political stability depends on the support given by the Monetary Fund and within the Monetary Fund with the support of the North American government.. Who supports the Macri government with their support inside and outside the Fund?. This is public and notorious. The newspapers also reflect it, President Macri spoke with President Trump and he told him that he supports him. Which means that they are banking it, because if that flow is cut off, the government falls.
We must be precise in this: what is the role of the Monetary Fund, which is not philanthropic and that help is very high? The Monetary Fund generally intervenes when there are critical situations at the request of the State's financial creditors., so that the State – in this case the Argentine State, does not interrupt the flow of interest payments to creditors.
So the role of the IMF is to lend to Argentina so that Argentina does not cut off interest payments to creditors.. The sea, that the help is not for the country, It is the country's creditors. Because otherwise what Argentina would have to do is whitewash the default. A debtor who cannot pay a cent of capital and who can no longer even pay all of the interest.. A government that is recognizing that it cannot fulfill its mandate if it is not with the extraordinary help of the largest loan it received in the history of Argentina and in the history of the International Monetary Fund., world record, 57 billion dollars, a figure that is equivalent to a national budget
That means that all this rests on the fiction that the country can control its public debt.. Which is a lie not because he can control it.. That is why even the Nobel Prize winner Stiglitz himself has said that Argentina is inexorably moving towards a new mega-swap., a new debt restructuring. Another mega exchange, because this is cyclical. The country irresponsibly goes into debt to the point where the situation no longer matters, can no longer pay the interest. Good, So at that moment you have to do something.. At that moment we enter into negotiations and then we sell to public opinion the image that through supposedly successful negotiations the country has been able to refinance the debt.. This has been the case since the New York agreements of Alfonsín de 1985-1987, the Brady Menemist plan 1992-1993, the same Kirchner-Lavagna mega-swap of the 2005-2010, before the Cavallo mega-swap- From the Street of 2001 and now it's going to a new mega-swap, that this government is probably trying to kick it so that the next government has to do it.

AS: But what if the conditions for paying the debt are now leonine?, for a new megacange they are going to be much tougher still?

HG: The objective would be to stabilize the situation to face this new mega-swap, something that is already happening. Because if you analyze what the Monetary Fund is doing, is giving Argentina a bridge loan. He is holding up the situation. Now a detail that no one has said a word about: how will the Monetary Fund be able to pay this loan??Because this is not an irrelevant figure. According to the payment conditions, When the Monetary Fund finishes its disbursement, I believe that the country is committed to returning in 8 quarterly installments the total of the loan. We are light years away from Argentina being able to return that money!
Then this paradox will occur. This mockery that the government requests an extraordinary loan to be able to complete its mandate, All the money is spent to maintain its stability and the next government has to pay for it.. That is what explains that one of the alternative candidates, Massa, has already thrown out the idea that the incoming government is going to have to renegotiate the agreement with the Fund.

AS: Cristina says she paid 195 billion dollars?

At the United Nations in September of the year 2014 She spoke about Argentina being a serial payer., that I had paid 190.000 million dollars. In a speech in August of that same year he had spoken of 174.000. Let's clarify something, the figures are not real, It's not really paid money.. What was paid was the interest, which may be between 50 Y 70.000 millions of dollars, which is not a minor figure, but not a figure of that high order that the former president cited.
Afterwards, the great criticism of Kirchnerism is that Kirchnerism sold the image of debt relief, when in reality the debt was increasing. Because the debt with Kirchnerism increased by about one hundred billion dollars in the 12 years of management. He received the State with a debt of 150 billion dollars and left it in 254.000.
The sea 254 billion at the end of Cristina's government. Now 340 billion official 30 of June, more bonds and the loan with the Fund. At the end of the year the debt could reach close to 400 a billion dollars at this rate.
Another argument that Kirchnerism gives is that it reduced the external debt by transferring a large part of the external debt to internal debt.. Thus, external creditors were paid privilegedly at the expense of inter-state debt. What does it mean??Money was taken from the Central Bank, from Banco Nación, of the ANSES of retirees, etc. Which is a very relative favor, because on the one hand, Debt with external creditors was discharged, but the internal debt remains, which in turn began to liquefy, like retirees' money, along with dollarizing the Central Bank debt. Therefore, in short, the famous debt relief argument was a great deal for external creditors.. Definitely, instead of questioning the legitimacy of the payments, instead of maintaining a tense situation, it was the other way around. It was fulfilled religiously. And even worse if we consider that they were paid GDP coupons that were calculated on an inflated GDP. The sea, they were benefiting. Do not confuse, because now Kirchnerism tries to present itself as having been the alternative of a system, when they were part of the system.
To conclude, I repeat that Argentina is in a trap of perpetual debt. What does this mean?? Who has taken and takes debt for unpayable amounts. Amounts without any inability to repay. For that you agree to pay more and more interest, more expensive rates since there is a greater risk of default. Whereby, If you increase your debt under these conditions you will never lower the cost of interest. So the big equation that is being implemented now is this: Since you have to pay more interest, you have to make more adjustments. how is the adjustment done?First pruning budget expenses, starting by liquefying and lowering the cost of labor, which is the remuneration of the State.
Perhaps the most flagrant case that was seen in the Nation and the Provinces is the paradigmatic case of the teachers of the province of Buenos Aires.. It is perfectly clear that they want to impose increases below inflation on everything in the public sector., that is, lower people's salaries. He has done the same with retirees. It is a scandal, retirees should have received a 12% in March and perceived 5.7 % for the December pension reform. A reform that is legal at that time although questioned before Justice. An important factor must be taken into account and that is that despite the fact that the Macri Government does not have a parliamentary majority, is having very important legislative help. First because of a part of the Peronism that plays into his game and then, We must not forget that here there is a silent partner of the government who is key in all this, which is radicalism.. Because radicalism is an ally of the government and it is so both in parliamentary form and for having given it the infrastructure of provincial committees that the Pro did not have., since it was not a nationally managed party.
The half sanction in Deputies was necessary because they need the Senate to approve it in an express treatment during the first fortnight of November. This time they brought forward their treatment to comply with the Fund's demands.. He 26 October the board met and approved the pending disbursements.

AS: How is this going to translate to prices??

At this moment no one talks about the absurdity of paying interest. They continue to crow about the problem of public spending, but they fail to say that the main public expenditure is interest. That this astronomical account, that is growing uncontrollably, It is the cause of the crisis we are experiencing. What is the fault of raising the interest rate?, this recession is happening. I believe that the government is desperately seeking to ensure that the devaluation of the peso is not passed on to prices., or if it is transferred it will be in a smaller proportion. It seems that the Fund thinks that there could be a transfer to the prices of the devaluation of the peso against the dollar of the order of 20, maximum 30%.
But if everything is transferred to prices, the macro devaluation was in vain, This whole scheme is collapsing and that is the issue that for me the government still cannot guarantee. Wholesale inflation is setting the tone and is precisely what responds to the exchange rate. This wholesale inflation is transferred to prices. With the price level of 6,5 % in September and October 5 al 6%, which are the product of transfer to dollar prices through wholesale prices. That is for me the biggest question that exists.. Because if the government fails to stop this transfer to prices, the entire macrodevaluation went to the rocket..
AS:Are we on the verge of macro devaluation?

Hyperinflation can occur as a result of this lack of control in the exchange rate and the transfer to prices and when the government is doing nothing to contain it.. That is why the key equation is that this is achieved, how the government is achieving it at the cost of falling real wages, which are the adjustment variable. They have to strangle the demand, They lower people's real wages to strangle consumption and in this way produce public and private economies and try to contain monetary expansion.
Now they are doing it at a very high and irrational cost because no country in the world is applying a policy of such high interest rates as Argentina.. We are facing a zero sum game. It means that one sector wins or another loses., while the real salary loses its value day by day, eaten away by inflation. Notice the paradox that while salaries fall, financial capital profits more every day from that fall.. The equation is perfectly clear there.. What is the decreasing labor cost that companies have because remuneration expenses are being liquidated and how at the same time financial profitability is being enhanced?. It is unfortunately the equation of how finance destroys the economy.

He interviewed Gustavo Giménez

Hector Giuliano: Bachelor of Administration specialized in public finances. Author of the book “Problems of the Argentine Public Debt”. This ten-volume book is the compilation of all the author's works.. It is a summary of the financial history of public debt since the crisis of the 2001 until now. My different works that touch on the different topics that intervene in the problem of public debt are ordered sequentially., the whole question of the Central Bank and a series of related topics.

reproduced from Anticapitalist Network

Nov 5, 2018