Given the widespread failure of the measures announced by Argentine Economy Minister Sergio Massa in August, the super-minister is studying the launching of a plan of massive controls identical to those implemented in the last century, as always, without any success.
The inflationary and financial chaos returned to the scene after the relative stability observed between July’s last days and August’s first weeks. The “Massa Plan” did not consolidate any of the proposed objectives.
The inflation rate persists at 7% per month, and the Country Risk index exceeded 2,800 basis points and reached the highest levels since July.
The economy operates without any anchor to reduce the variation of prices. A mechanism was generated whereby monetary issuance is tied to the remuneration of liabilities, and inflation is adjusted monthly.
As a consequence of the dismal results obtained, the government of Alberto Fernández is studying the possibility of implementing a heterodox stabilization plan, which could be officially launched in November.
As usual, all measures that have already failed in the past will be applied.
The hypothetical program would include a broad freeze on prices, wages, official exchange rates, and public tariffs. The strategy consists of generating temporary palliatives to break the “inflationary inertia” and produce a shock on expectations.
With an inflation level close to 100% year-on-year by the end of the year, the government is considering the shock option over the gradualism prevailing to date, in a completely desperate act to reach next year’s elections with some results to show.
The incorporation of Gabriel Rubinstein into the economic team suggested the possibility of a faster advance in fiscal discipline, but the primary and financial deficits increased in August, the first month of the new team’s administration.
If such a program is implemented without correcting the fiscal and monetary imbalances of the economy, there is a risk of reaching a situation similar to the one experienced during the famous Gelbard Plan in the 1970s or the Austral Plan in 1985.
The heterodox programs implemented in the second half of Argentina’s twentieth century failed irremediably, some lasting a few years but others running out of steam in months or even weeks.
Under a scenario of fiscal dominance, the consolidated deficit determines the anchor on expectations.
As the economist and congressman Javier Milei pointed out, the government accumulates a total imbalance of close to 11 points of GDP between primary deficit, debt interest, and Central Bank deficit (quasi-fiscal).
With information from Derecha Diario