Caputo goes for the cap, Milei goes for caste?

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President Javier Milei knows he must move fast. Beyond the speech he is preparing to give today at the opening of the Congress sessions, in which he will once again harangue his electorate with the cultural battle against the 'caste', he is currently worried about the economy. One priority is to move forward with the lifting of the cepo; the other is to be able to pass through Congress some of the key reforms demanded by the economy. For the first one, the support of the International Monetary Fund (IMF) and, above all, of the US Treasury, which has the last word in the board of directors of the international credit organization, will be crucial. For the second, meanwhile, the bet is that, financially asphyxiated, the provinces will agree to negotiate (almost) without conditions.

The reality is that practically all the provinces that have debt issued in the market know that, sooner or later, they will have to sit down with their creditors. Some, such as La Rioja, which this week announced that it did not have the funds to pay a maturity of US$26 million, have already chosen the untidy path of confronting their creditors. Others, such as Cordoba, one of those with the tidiest finances, stealthily began to work on a voluntary debt swap, with the advice of JP Morgan and Santander banks. Ricardo Quintela and Martín Llaryora, two different management styles.

But they would not be the only ones. The banks believe that provinces such as Buenos Aires, Salta or Entre Ríos (which has just approved an 18% salary increase for provincial employees) will hardly be able to avoid a debt restructuring, even though they privately state their intention to avoid it. In addition to suffering a total cutback in the discretionary transfers they used to receive from the Nation, they are also seeing how the recession is wreaking havoc on their revenue collection. When the economy slows down violently, there is hardly anyone left standing.

The Nation, in fact, will show again in February, for the second consecutive month, a primary surplus (a positive balance between revenues and expenditures) and probably also a financial surplus (after debt interest payments), if the consolidated public sector is considered. But also beginning to attract the attention of those who closely follow the Treasury's numbers, is the brutal drop recorded in February in the collection of taxes linked to activity. "Nominality is over and now the economic slowdown is starting to take its toll," they warn.

Thus, part of the good fiscal number of February will be explained not so much by a real improvement in revenues or the cut in expenses, but because the Economy continued with the liquefaction and also decided to "step on the till", as they say in the jargon. The victims are not only the provinces, but also in this case the electricity generators, which must receive every month a compensation from Cammesa, the state-owned company, for the cost of the energy they produce and which is not paid by the users. Cammesa's bill is some $400,000 million or $500,000 million per month, depending on consumption," explains the head of a generator. November's bill was only 50% paid, December's is 100% due and January's is due on March 15. By then they will have accumulated a debt of close to one billion pesos", he warned. On Tuesday of this week, when the energy transporters threatened that they no longer had money to pay salaries, the Treasury transferred only $140,000 million to Cammesa. With governors or energy companies, the Government always plays on the edge.

It is clear that there are no easy months ahead. Milei will warn again in his speech today. To keep the best fiscal numbers it will take much more than a blender and a brick on the till. In the Government, however, they hope to be able to announce soon the lifting of the cepo. "The cepo expires quickly. And then, before the end of the year, we should have a bimonetary economy", anticipates a source with access to the President's closest circle.

Nothing better for the official story than the spreading of corruption scandals such as those that now involve Alberto Fernández with Nación Seguros and a handful of friendly brokers. But it is not clear that the Government wants to go to the bottom. If it wanted to, it should probe deeper. Radical Deputy Martín Tetaz stated in a radio interview that the same could have happened in the province of Buenos Aires. Justice should investigate ex officio. But the Government should also investigate (if it does not already know) what was going on in the world of exchange houses last year, when for a firm with no genuine business (because due to the exchange control no one could buy official dollars) more than US$ 2 million were paid in the market. Or how some official agencies, which move billions of pesos per month and choose only a handful of funds to invest them, allocate their investments. In the City of Buenos Aires there are plenty of businesses. The problem is that they are not exclusive of a political space. On the other hand, when it comes to insurance, some unions know the business to perfection.

In the developed world, the National Securities Commission (CNV) and the National Commission for the Defense of Competition (CNDC) play a key role in many of these cases, not only depending on the good action of Justice. A first encouraging sign: as confirmed by LA NACION, after the complaint filed by the Coalición Cívica, the CNDC started an investigation for alleged cartelization in the prepaid health insurance business. The statements made by the head of Swiss Medical, Claudio Belocopitt, who publicly anticipated the increases that the industry, which is supposed to compete, would make, do not seem to have been very happy. "The costs were going up the elevator and the updates (of the fees) were going up the stairs, which generated an enormous deterioration. The representatives of the prepayment companies are going to hold a meeting at the UAS (Unión Argentina de Salud) in the next few hours where we are going to get together to, first, define practices to get out of a situation that is extremely alarming", said the businessman to the journalist Ernesto Tenembaum on Radio con Vos. The last time the CNDC carried out an investigation with a result that had a real impact on the market was during the Macrista administration, when it forced banks to divest Prisma, the company that at that time exclusively issued Visa cards. Other investigations remained merely good intentions.

Trust funds

Mainly driven by fiscal urgency (rather than by a desire for transparency),the Ministry of Economy plans to take over next week the management of the trust funds that until now were mainly under the administration of the BICE and Nación banks, through their related company, Nación Fideicomisos. The decree that establishes the transfer to the orbit of Minister Luis Caputo is to be signed by the President and will be published next Monday in the Official Gazette.

"The idea is to review them, analyze the irregularities, ask for updates of the audits to the SIGEN, to determine the way forward and close the trusts that correspond, which will be almost all of them. Some of them cannot be closed by decree, but by law; in those cases we will take a little longer, but what we are going to do is to intervene them", official sources explained.

In the meantime, the Government hopes that the gradual opening of the economy will help to moderate the price escalation. With the dollar almost flat, all products are becoming more expensive when measured in hard currency, to such an extent that the large supermarket chains began to bring in more products from abroad. There are industries, such as textiles and electronics, in which prices have been running well ahead of inflation and devaluation. The idea, in principle, would be to free up bureaucratic obstacles to imports. In addition, the Foreign Trade Single Window (VUCE) will be put into operation again, with the aim of speeding up Customs processes, the eternal black funnel in all administrations. The caste is still active everywhere you look.