Respectfully disagree. There is no surplus, because the financial deficit does not account for capitalized interest. If a US GAAP or IFRS company does not record capitalized interest on the income statement that is called fraud. If you account for capitalized interest, total deficit is closer to 10% of GDP.
You do not mention the massive instability of the peso when the Central Bank has negative reserves while the aggregatr monetary base has grown 100%+ YTD. It only takes a dollar sneeze to generate a Minsky moment, and the closer you get to the midterms the riskier this will get.
For an investor doing carry the question is super simple: do I keep two months more of carry to make 5%, or dollarize now at the lowest FX on record?
What happens when people start making that question to themselves?
This time is different are the most dangerous words in finance.
That is why I chose the title, it wasn’t stating a fact but more a wordplay on the Macri/Milei comparison. Agreed that the net reserves are still negative, but they received those with -12B and the importer debt of another time that amount, both of which are practically gone already. But the negative net reserves are also the reason why they are weary of lifting the cepo: they will probably want some extra padding first.
Running deficits is bad! Who would have thought?!? But seriously maybe common sense finally started to enter public discourse space...
Another thing though is how long the sane approach will last. Continuity of good policies is just as important as good policies in first place. And the root of bad policies is political system. Which last time I checked did not change.
Maybe its normal. Takes 100 years of disastrous governments to finally get a sane one. All part of "democratic process".
Respectfully disagree. There is no surplus, because the financial deficit does not account for capitalized interest. If a US GAAP or IFRS company does not record capitalized interest on the income statement that is called fraud. If you account for capitalized interest, total deficit is closer to 10% of GDP.
You do not mention the massive instability of the peso when the Central Bank has negative reserves while the aggregatr monetary base has grown 100%+ YTD. It only takes a dollar sneeze to generate a Minsky moment, and the closer you get to the midterms the riskier this will get.
For an investor doing carry the question is super simple: do I keep two months more of carry to make 5%, or dollarize now at the lowest FX on record?
What happens when people start making that question to themselves?
This time is different are the most dangerous words in finance.
That is why I chose the title, it wasn’t stating a fact but more a wordplay on the Macri/Milei comparison. Agreed that the net reserves are still negative, but they received those with -12B and the importer debt of another time that amount, both of which are practically gone already. But the negative net reserves are also the reason why they are weary of lifting the cepo: they will probably want some extra padding first.
timing on Vaca Muerta development couldn't be better. Assume that provides a substantial tailwind to fiscal/monetary balances.
Running deficits is bad! Who would have thought?!? But seriously maybe common sense finally started to enter public discourse space...
Another thing though is how long the sane approach will last. Continuity of good policies is just as important as good policies in first place. And the root of bad policies is political system. Which last time I checked did not change.
Maybe its normal. Takes 100 years of disastrous governments to finally get a sane one. All part of "democratic process".
Tremendous work my friend
Thank you sir