1 de agosto de 2019

[Editorial] The polarization of the devaluators


With the campaign towards the Primaries entering its final phase, Alberto Fernández has just announced that his economic plan pivots on a new devaluation of the peso. He announced that without holding back, pointing out that “we need a strong dollar. I have always believed that. We are certain that an undervalued dollar condemns us to the worst scenario. With this undervalued dollar we are not going to obtain dollars to produce.”

The promotion of a new devaluation is intertwined with his stating that he will stop paying interest on the Leliq (“Liquidity Notes”) of the Central Bank. Although Clarín maliciously equated this statement with an intention to default, what Fernandez meant is clear: to the extent that the Leliq expire they will not be renewed, so that those pesos will go directly towards the purchase of dollars. The resulting greater demand will produce a rise in its price - that is, a new devaluation. However, as the stock of Leliq already exceeds 1.2 trillion pesos, which at the current exchange rate is equivalent to 25 thousand million dollars, these un-renewed maturities being passed to the dollar may produce a devaluation of very high proportions. Since these 25,000 million dollars are equivalent to more than all of the Central Bank's net reserves, the function of a devaluation is also to liquify its impact in dollars, allowing existing currencies to be used for the payment of the external debt. For those who put their savings in fixed terms, in exchange for relatively high interest paid by the banks, the possibility of a new confiscation appears. If in the past it was due to mechanisms such as the Bonex plan of the first period of Menem or the corralito of Cavallo-De la Rúa, now it can be directly due to the liquidation that the devaluation will actually impose on savings in pesos.

As can be readily seen, the big beneficiaries of a devaluation will not be the workers and pensioners, as Alberto Fernández demagogically promised, but instead the international creditors and the native capitalist class, which may still reduce wages measured in dollars and even pulverize the savings of the medium sectors. Currently, the Argentine minimum wage is under US$ 300, falling below most of the countries in the region. Needless to say, a new devaluation would further pulverize the income of workers and the retired. It is no accident that Alberto Fernández has pointed out in the same report that he will meet with unions and businessmen, so that “everyone makes an effort”. But these are phrases of circumstance. Since the interests of both are opposed, if one makes an "effort" the other benefits. In this case, with a new devaluation, the big beneficiaries will be the capitalists. That ‘effort’ would be certified with a social pact, as Cristina Kirchner announced in the presentation of her book Sincerely. Now we confirm what we have always suspected: that the starting point for that pact will be a new blow against salaries, carried out by means of a huge devaluation.

With the objective of also winning over agricultural capital, Fernández told journalist Roberto Navarro that the devaluation will also be positive in that it will facilitate the liquidation of the crop. The logic is clear: with an international price in dollars already established, devaluation increases the price of the crop measured in pesos. For agricultural capital, this means an extra premium, since many of its costs are in pesos. The problem, on the other hand, will be for the workers, because that measure will result in a significant increase in food prices, which represent the most important part of the cost of living among lower income sectors. Fernández’ devaluation will generate more poverty and destitution.

It is interesting to keep in mind that Fernández believes that devaluation is the country's way of obtaining dollars. Here too, the logic is clear: with a higher dollar, capital that enters from abroad can buy Argentine assets at auction price. In particular, Fernández plans to back the total sell out of Vaca Muerta. On this point, one of his economists, Guillermo Nielsen, has just leaked his program. In a report to El Cronista, he anticipated that if Fernández becomes president, they will reduce taxes on the oil companies, starting with  withholdings and the tax on checks. And to provide ‘legal certainty’ for businesses and to avoid fear of control over capital, they will set up a trust fund in New York that allows companies to ensure the free availability of their profits.


Now, the devaluation with which Fernández intends to win the support of the capitalist class is also targeted by Macrism. The government is fully aware that after the elections it will carry out a new devaluation, hitting wages and the fixed income of workers hard. This will not weigh against the benefits to speculative capital that has entered in recent weeks. On the contrary, when withdrawn on time, the devaluation will be the final phase of a negotiated deal of uparalleled proportions internationally.

That a new devaluation is on the horizon for Macrism is not only proven by the fact that its spokespersons have not come out to argue against Alberto Fernández on this point. Taken as a whole, it is an inevitable conclusion that is written all over the generalized bankruptcy of the Argentine economy. With a debt that is close to 100% of GDP, with annualized inflation that ranges between 40 and 50% per year, with a hidden monetary issue via the Leliq, which is equivalent to almost the entire monetary base, with a schedule of debt payments impossible to deal with, new runs against the peso and devaluations are inevitable. It already happened in 2014 and will happen again in the short term.

Let the capitalists pay for the crisis

The impact that a new devaluation will have will be the opposite of what Fernández is promising the workers: there will be no recomposition of wages and pensions, but instead more cuts. It is no coincidence that Alberto Fernández’ economists have been even more explicit than the candidate, noting that, in addition, a rise in salary should be avoided because of its “inflationary consequences” and that collective labor agreements should be modified - that is, continue along the road to Labor reform We are facing a policy of confiscation of the workers, which although in relatively different ways, ends up arriving at the same station as Macrism and its rabidly anti-worker program.

The Left Front states that in order to avoid this new confiscation it is necessary to take substantive measures, which imply a social and political reorganization of the country. This must begin with the non-payment of the usurious debt, the nationalization of banks and foreign trade. Only in this way will we be able to manage currencies in a planned way for economic development, centralize national savings and develop an international trade that aims to provide the country with greater growth in its productive forces. This task is incompatible with the systematic looting carried out by financial capital on the country and the IMF guardianship. By its very nature, this economic solution demands a political solution, which is the government of the workers.

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