Data from International Institute of Finance (IIF)a consortium of international banks, show how the monetary aggregates of a group of selected countries of the region evolved. The process is similar in all. Years of relative stability are interrupted in 2020when quarantines and restrictions force all central banks to relax their monetary policies to avoid massive bankruptcies.
To the best of their ability, all countries resorted to fiscal and monetary stimulus during the worst months of the pandemic. Businesses had to be kept afloat and people able to afford day-to-day costs. As the pandemic receded, albeit probably late, all countries began to rapidly withdraw those stimuli. Probably late because, according to many analyses, they did not arrive in time to avoid the peak of inflation.
While in Latin America, countries financed fiscal stimulus with debt or savings, they resorted to monetary stimulus to assist the economy. Not to pay the bill (Pazos)
That miscalculation, understandable or not, nevertheless takes on a different color when looking at the Argentine case. The country did not want or could not get out of this process and the global inflation peak, which was already in a particularly high dynamic in Argentina, reached levels above 60% year-on-year advance seen until June and around 90 % expected for this yearaccording to private estimates.
“What did not come is the fiscal correction. What Argentina did not do is correct after the crisis, something that all the countries did. Knowing that he did not have access to the market to place debt, something that financed the stimulus in many other countries, he should have made the exit faster than the rest and did nothing, ”he explained to Infobae Gabriel Caamano Ledesma Consulting.
No access to the dollar debt marketto which almost all Latin American countries resorted during the pandemic to take advantage of low international rates and thus finance the deficit of quarantine times, Argentina could only resort to issuing monetary.
“What you see in those numbers, year-on-year variation, is partly nominal. The change in the quantity of money in an economy with single-digit inflation is not the same as in an economy with 40 or 50 points of inflation. Because you need much more money to have the same purchasing power in circulation, ”he told this medium. Martin Vauthier from Anker.
What did not come is the fiscal correction. What Argentina did not do is correct after the crisis (Caamaño)
“However, even at those levels, you see that the growth not only did not stop but remained at very high levels on a constant basis. After the 2020 jump it went down, but remained high. And in 2022 it went directly to another level: to the need to print to finance the deficit you added the issuance of pesos to cover purchases of dollars from the Central Bank, the endogenous issuance of pesos for interest from Leliq and more passes, in June, a huge amount to cover the repurchase of collapsing peso bonds,” he added.
“And that explains a lot about what you’re seeing in inflation numbers and parallel dollars,” he concluded.
For John Manuel Pazos of TPCG, meanwhile, the nature of the Argentine process in the pandemic and later was very different.
In 2022, it went directly to another level: to the need to print to finance the deficit, you added the issuance of pesos to cover purchases of dollars from the Central Bank and the endogenous issuance of pesos for interest from Leliq and Passes (Vauthier).
“It is true that all countries turned to the stimulus. But the monetary data hides something. While in Latin America, countries financed fiscal stimulus with debt or savings, they resorted to monetary stimulus to assist the economy. Not to pay the bill. The most lax monetary conditions were for those who could not pay the card, so that they could take another credit. Or to refinance companies”, said the specialist.
“The difference that you see between the curve of Argentina and the rest is that here the monetary policy not only refinanced the private sector. He also invented money to pay the fiscal stimulus bill. That’s why you had to expand twice,” said Juan Manuel Pazos to Infobae.