Strength builds as the adjustment continues, and the bet against the dollar remains strong

New Stage of Adjustment: Pension Reductions, Sharp Sales Decline and Moderate Recession Predicted Amid Inflation Fears

Luis Caputo, a member of Javier Miley’s team, was appointed as a minister and has taken an active role in the adjustment process. One of the most contentious aspects of the adjustment was the elimination of subsidies for urban transportation in the provinces. Milei took immediate action by withdrawing the Omnibus bill from Congress due to concerns about specific approval and potential cuts to various items.

The fiscal surplus objective is a top priority for many, but this may come at a political cost. The stock prices fell, and bonds decreased, but not to the extent expected. This suggests that the market believes in the Minister’s ability to achieve a financial surplus and maintain political stability. Inflation is expected to increase around 18%, driven by rising electricity, gas, gasoline rates, prepaid bills, and school supplies.

The adjustment process based on significant reductions in pensions, salaries, fixed-term deposits in pesos has entered a new stage different from what has characterized the Argentine economy since 2023. Sales have dropped sharply since January due to price stampedes after December’s devaluation. Companies are now focusing on quantities sold rather than rebranding races. Discounts of up to 70% are evident in various businesses including supermarkets and retiree homes representing a new stage of downward trend in quantities sold.

Economists predict that families will face significant challenges during this adjustment process and predict that moderate recession may be necessary to lower inflation due to current deregulation of prices. The Central Bank has purchased US$ 6.8 billion since December’s devaluation which is expected to maintain fixed exchange rate policy but some market operators and analysts consider possible exchange rate jump in April necessary

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