March 8, 2014
Green flag down
INDEC statistics bureau’s latest growth figure of seven percent has raised many eyebrows (not for the first time in the last six years) but perhaps the real question here is the impact on what continues to be the bottom line for Argentina’s economic policy — namely, the national dollar hoard. Given INDEC’s constant inflation denial, a figure of seven percent could very easily arise from the ensuing confusion of nominal and real growth without any further statistical deceit involved. The original purpose of that inflation denial was not to insult the intelligence of the Argentine public but rather to slash the service payments on index-linked bonds. Yet a growth rate of seven percent (unlikely to slow down with the heavy public spending of an election year) will inevitably revive the service of the growth-linked bonds which gave the government a free ride in a stagnant 2012. This, then, is the real question triggered by INDEC’s latest growth figures (over double the 3.22 percent floor for growth-linked bond payments) — the race between the almost four billion dollars which will almost surely have to be paid out on this year’s growth-linked bonds and the inflow of greenbacks from the dollar whitewash (where there are hopes for four billion dollars but more general expectations run at half that figure).
This question will not be answered in any near future, of course — the 2013 growth-linked bonds will not have to be honoured until late 2014 while the horizons for the dollar tax amnesty are even more diffuse. There is a fine line between whitewashes and money-laundering which needs to be clarified, among other aspects, before most people holding dollars abroad will bring them home. Repatriation of these greenbacks is an implicit admission of evasion and a deep skepticism as to whether AFIP tax bureau will keep its side of the bargain has only been reinforced by last week’s story of Supreme Court Chief Justice Ricardo Lorenzetti being investigated as a political target (even if that story has yet to be substantiated).
The growth figures and the dollar whitewash are also interlinked in another sector. To the extent that the growth is genuine, its twin pillars seem to be the auto industry and the housing sector whose revival seems based on optimism that the new Cedin bonds backed by the returning dollars can unblock the transactions crippled by real greenbacks being banished from a “pesofied” market. In many ways the credibility of the latest growth figures will be determined by the race between the growth-linked bonds and the dollar whitewash.