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The Kirchners travel to El Calafate and there are economic expectations
El Cronista
August 29, 2008

Not announcements, but signals, are expected. INDEC will acknowledge a higher inflation rate. They will listen to proposals for the bondholders in default. They will sound out possible solutions for the Paris Club.

This weekend the Kirchners will travel to El Calafate, and once again there are expectations about economic decisions that need presidential sign-off. The staff of the Cabinet Chief are not promising imminent announcements, but those close to Sergio Massa are confident and are patiently awaiting signals from the highest ranking 'penguin.' The solution for the INDEC seems clear on paper: to get the organization to begin to report an inflation rate closer to 0.8% monthly rather than the shocking 0.4% in July. They understand at the Casa Rosada, as well as at the Central Bank, that financial investors won't demand the absolute truth on the inflation index, but at least some kind of believable lie that would let them recovery something that they lost with the falsification of the indexed bonds. And they leaked reports that made Cristina enthusiastic, with the promise of heading on a logical path with the finances that would allow the country to be placing debt on the markets before March 2009, at less than 12% in dollars, against 15% that Argentine papers yield today, three times those of Brazilian paper.

From there comes the enthusiasm from the economic team that is led by the Cabinet Chief (Massa, Redrado, Marc del Pont and Minister Carlos Fern ndez) to update the debate about if it's time to accelerate the moves toward a Paris Club deal. "The only message that we made clear to Tom Shannon," they said yesterday in the government, "is that we will not accept an audit from the IMF." And they swear that they got a wink from the State Department man, which is not the first time that help was promised from Washington to advance the negotiation. It's hard to see news before the end of the year, say officials at Economy and the Central Bank, but all are waiting for presidential signals to know how to proceed.

So far, it is set to keep intervention going in the markets to stave off a drop in bond prices. Next week they'll double the volume of auctions and they confirm that at any time the official bank could repurchase debt if necessary. The 2008 finance plan is closed for the government, which aspires to place a new bond in dollars under Argentine law by the first quarter of 2009, in an emission that could bring US$2 billion with rates around 11.5%. The most sensible men in the Kirchner administration suppose that for that time to come the country will have moved ahead on normalizing the debt in default, including analyzing proposals for reopening the debt swap, "whenever they come as proposals from the bondholders that the country agrees with," the informants unabashedly say.

In the immediate term, the most influential officials affirm that there is a new economic plan coming together. It lowers the dollar to 3.05 to stave off inflation, there is less fiscal generosity in tax reductions on salaries, the rise in spending will converge at 30% against the 35% growth in revenues, plus power rate hikes and interest rate hikes, cooling down the economy without saying so, and even promising a sane salary moderation this year without reopening contracts and without salary hikes by decree, as the CGT demands. Decisions on first and last names are still lacking, while still no one seeks changes in the cabinet leadership. All the intrigues of every weekend will continue to dispel illusions and disappointments from El Calafate.