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OPINION AND ANALYSIS | 22-04-2023 06:23

$420: The ‘elegant’ dollar

This is the level of tension and uncertainty with which the Casa Rosada, the Economy Ministry, and Vice-President Cristina Fernández de Kirchner’s closest allies live, the day-to-day vicissitudes of a failing administration.

The level of desperation in the Casa Rosada and the Economy Ministry is similar to what the majority of the population is suffering. The reasons, though, are very different. 

One example that illustrates the situation is what occurred this week during the Llao Llao forum, a criollo version of the World Economic Forum’s annual Davos meetings. The Argentine establishment, led by agricultural and real-estate tycoon Eduardo Elzstain, made their way to the Patagonian city of Bariloche to attend what is probably the most exclusive and influential business and networking meeting of the year. Unlike other gatherings, the Foro Llao Llao is attended only by the business elite, along with the intellectuals, economists, and politicians that they want to mingle with. It’s not just politics and how to deal with regulation – there’s also time to talk about innovation, artificial intelligence and unicorns. 

The main course is obviously the political leadership that this year used the forum as the official launching pad for their presidential campaigns. The opposition, feeling at home in one of Bariloche’s most exclusive hotels and surrounded by the titans of the private sector, showed up en masse. Patricia Bullrich, recently having gone on a leave of absence from the leadership of the PRO party to focus on her campaign, broke the ice. Buenos Aires City Mayor Horacio Rodríguez Larreta then laid out his plans during Tuesday’s dinner, less than an hour after María Eugenia Vidal, his ally turned fierce critic, had her turn in the spotlight. Yet, the hottest ticket was reserved for Javier Milei, the right-wing libertarian who’s become the talk of the town (or should that be city?) as he continues to make gains on his competitors and in surveys, in many cases generating a technical draw with both Juntos por el Cambio and the Frente de Todos in the different PASO primaries scenarios. With the opposition fractured after the renunciation of former president Mauricio Macri, the excitement centred on whether Horacio, María Eugenia and Patricia would cross paths, and how crazy Milei’s speech would be. 

The ideas weren’t a novelty, everyone had heard them before. In that context, the Llao Llao forum agenda also held a spot for President Alberto Fernández, granting him the privilege of the event’s closing speech. An asterisk in the official programme next to his name read, “invited, pending confirmation.” Perfil had previously indicated that the pan-Peronist Frente de Todos had “emptied out” the forum by refusing to partake, in particular with the presence of the president and Economy Minister Sergio Massa, but also other candidates such as Eduardo ‘Wado’ de Pedro. As his office denied he would attend, Alberto’s spokespeople confirmed he would chime in via teleconference. As sound and video were being tested, his office made an about-face and confirmed his presence at the same time as his spokespeople claimed it wouldn’t be possible for scheduling reasons. Ultimately, Alberto didn’t show up. He was dealing with bigger problems than facing a room full of rich people who probably wouldn’t vote for him.

The president’s back-and-forth had to do with the currency markets which were already out of control. A step in the wrong direction could make things even worse.The “parallel” or financial dollar peso exchange rates led by the “illegal” blue-chip rate broke well above the psychologically significant level of 400 pesos per greenback. In typical Argentine fashion, once it hit 420, it sparked a series of memes and satire online tying the value with cumbia rapper L-Gante and his “cumbia 420” genre, which is closely tied to cannabis culture. A new run on the peso was underway, and Massa and Alberto needed to figure out who was behind it (someone other than them was clearly responsible, their inner conspiracist told them). The first culprit was the agricultural sector, which had agreed to participate in a new round of preferential exchange rate access for export liquidation dubbed “dólar soja 3,” in which they’d be able to sell their soybeans and other products for 300 pesos per dollar, compared to an official exchange rate closer to 220. With the government looking to rake in somewhere between US$5 billion and US$10 billion by incentivising exporters in order to “resist” a sudden devaluation, by Wednesday exporters had suddenly reduced activity to zero. Close to Massa they accused the agricultural sector of conspiring against the government to force a sudden devaluation that would inevitably feed into inflation. And behind the move, they saw presidential adviser Antonio Aracre.

Freshly retired from the private sector where he headed agricultural giant Syngenta, ‘Tony’ became Alberto’s chief economic advisor less than three months ago, in part with Massa’s blessing. Almost immediately he clashed with the Economy Ministry as he spoke freely about the need for a devaluation and further splintering of the peso-dollar market. This time around, Aracre held a private lunch with the president, during which he presented a series of measures that contradicted the current policy path chosen by Massa and his team – information later leaked to the press and published by several journalists. Aracre was set to replace Massa in this scenario, as the man from Tigre would prepare to become the Frente de Todos’ presidential candidate. The agro sector froze its operations in the face of a potentially more beneficial exchange rate in a devaluation scenario, while market participants aggressively demanded dollars to cover their positions as a consequence. By the end of the day, Tony had resigned as both president and economy minister blamed him for sparking a speculative jump in the value of the dollar. The following day, Sergio and Alberto released a picture of them happily sharing a conversation in the Olivos presidential residence. In an ironic tweet, presidential spokeswoman Gabriela Cerutti shared the image with the epithet, “bitter infighting.” Aracre had accused her of being behind the leaks that led to his forced resignation. Unfortunately for them, the peso’s value continued to sink and exporters didn’t appear to be in a hurry to sell their stocks.

This is the level of tension and uncertainty with which the Casa Rosada, the Economy Ministry, and Vice-President Cristina Fernández de Kirchner’s closest allies live, the day-to-day vicissitudes of a failing administration. Every day we are on a knife’s edge as the margin of error quickly approaches zero. Not too different is the attitude of the leaders of the opposition, where a treacherous battle is being waged at every level, starting with Bullrich and Rodríguez Larreta, under Macri’s watchful gaze. As the population suffers under the yoke of runaway inflation, this level of disconnection with reality appears to benefit Milei, whose anti-system and inflamed rhetoric has already captivated men and youth, putting him at competitive levels with the leading coalitions ahead of the primaries. It doesn’t matter that Milei’s proposed dollarisation stands on shaky theoretical grounds, or that burning down the Central Bank is far removed from his potential electorate’s everyday problems. They are angry and the ultra-liberal economist feels like the only choice possible if Argentina is to “drain the swamp,” as they say in the United States. Hopefully, the deadline to present formulas for the primaries will begin to reduce uncertainty while the results of the PASO vote could pave the way for a little optimism. It doesn’t seem likely.


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Agustino Fontevecchia

Agustino Fontevecchia


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