Massa promises budget surplus, CCL for exporters and ‘signals of austerity’

Speaking at a press conference Monday afternoon, the Economy Minister vowed to boost exports and bring in foreign currency with a view to eliminating ‘distortive’ currency controls

Argentina's presidential candidate Sergio Massa speaks during a press conference a day after the first round of Argentina's presidential election, in Buenos Aires, Argentina October 23, 2023. REUTERS/Cristina Sille

Economy Minister and presidential frontrunner Sergio Massa promised to set Argentina on the path to balanced books by incentivizing exports, bringing forward the payment of some bonds, promoting a budget surplus, and shifting towards austerity.

Speaking at a conference with the international press after surprising onlookers by coming top in the first round of the presidential elections, Massa added that he recognized that Argentina’s multiple exchange rates distort the market, but that the country would need to recover its international reserves through exports before the flotilla of exchange rates could be simplified.

“We’re going to study mechanisms for rewarding and bringing forward payments for some Argentine bonds in order to guarantee that we recover depth and trust in the sovereign bond market,” Massa said, in response to a question about the market reaction to his victory and his economic and fiscal measures going forward.

He said Argentina would need to discuss its deal with the International Monetary Fund (IMF) “wisely, firmly, and above all, aiming for the program to be associated with Argentina’s growth and development, since Argentina is a developing country.”

The government of outgoing President Alberto Fernández and the IMF signed an Extended Fund Facility agreement in 2022 after renegotiating the US$44 billion debt former President Mauricio Macri acquired in 2018. The deal includes an economic program that Argentina must comply with in order to receive disbursements every three months, which are used to pay for the previous debt with the IMF.

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With Argentina’s foreign reserves running on fumes after a severe drought slashed commodity crop exports by around US$20 billion earlier this year, the country has paid recent maturities with funds from its China currency swap and a loan from Qatar, the latter of which it has since repaid. The fate of the IMF deal will be one of the major questions hanging over whoever moves into the Casa Rosada presidential palace on December 10.

Regarding Argentina’s currency controls, he said: “It would fill me with happiness if Argentina didn’t have the restrictions it has.” He went on to highlight the drought and the country’s obligations to the IMF as factors conditioning currency availability to ease restrictions. 

Massa expressed optimism that stronger exports in 2024 would “give us plenty of liberty to start eliminating restrictions, which are distortive, but which are part of the resolutions that we have to take.” Argentina shifting from importing to exporting energy and a recovery in export crops such as soybeans after this year’s drought were among the factors he said would see the country export between US$31 billion and US$40 billion more in 2024 than in 2023.

He highlighted that Argentina is exporting gas to Chile, plans to start flowing gas from its vast Vaca Muerta shale field to the neighboring country, and is finishing an oil pipeline that will allow it to export oil to Chile and further afield via ports on Chile’s Pacific coast. 

Argentina’s export income will depend largely on the fate of its grains harvests. The Rosario Board of Commerce cut its wheat and maize forecasts on Thursday, saying that 90% of the growing area was experiencing drought and water scarcity. However, it increased its soybean forecast from 48 million to 50 million tonnes earlier this month.

In response to questions about a prospective Massa government’s relationship with Mercosur neighbors Uruguay and Brazil, he underscored the importance of the regional bloc negotiating as a group. “In terms of negotiations, things go better for us when we work as a bloc, because other blocs somehow respect us more,” he said.

Mercosur has been in protracted negotiations with the European Union over a free trade agreement. Recently, the blocs have tussled after the EU attempted to introduce stricter anti-deforestation laws into the deal. In late September, Paraguayan president Santiago Peña threatened to break off the negotiations if no deal was reached by the time Paraguay takes the Mercosur rotating presidency on December 6.

Massa will compete for the presidency in a run-off election against far-right libertarian economist Javier Milei on November 19.

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