Davos, meat agreement, GDP and dollar

Strong week, from the economic point of view, on several fronts: there will be an official agreement with the refrigerators to try to put a brake on the meat prices, which were the ones that drove inflation in the last month and a half; President Alberto Fernandez will reopen the external agenda with a visit to Chile and with its participation in DavosAlthough this time there is no talk of investment rain; Indec will publish the data of GDP November, for which a new rise is expected; Relevant numbers of the exchange dynamics.

Alberto Fernández and a virtual visit to Davos

The government week will have two milestones on the international agenda. On Tuesday Fernández will travel to Chile, he will meet his pair Sebastian Piñera in Santiago and will talk about the relationship of the regional bloc and about the progress in the Asian export exit through the bi-oceanic corridors. On Thursday, already in Buenos Aires, he will participate, with a virtual exhibition, in the Davos World Economic Forum.

In 2016, the presidential participation in Davos generated strong expectations of arrivals of external investments. Subsequent data lowered the price to the potential for an investment surge or rain after the international meeting in which more than 1,500 business, government and civil society leaders from more than 70 countries participate.

In fact, since that mentioned Davos January 2016, only USD11.36 billion of productive investments entered the country. Instead, USD38.018 million entered for speculative purposes, much more volatile. Without going any further, the number of those who left on that channel largely explains the exchange rate debacle of 2018 and 2019: USD37,204 million.

The price of meat and the search for a cap

This week the Government will seek to close an agreement with the meat sector. You upload them in December in the Basic Food Basket (CBA), 5.1%, and 45.5% in the whole of 2020, they finished sounding an alarm that had already been making a lot of noise in the last two months. Ads will include pricing agreements for one year.

The Commerce secretary It is the one that is negotiating with the entire chain of the livestock sector. To the official requirement that the agreement include 12 cuts, which represents a fairly high proportion of a half beef, the sector responded with a counter offer that is still being discussed. Upon closing last week, the deal, which would ultimately include fewer cuts, took shape and would be announced at this.

As highlighted from, in 2020, the per capita index of meat consumption it hit the lowest in 40 years and was 49.7 kilos.

Did the PBI continue with its rebound?

Tuesday, the Indec will publish the Monthly Estimator of Economic Activity (Emae) of November. Initially, the month showed good data and a new step is expected in the uninterrupted recovery that the production began in May and that achieved six consecutive months of improvements. Although this without being able to reverse the fall of a quarter of the GDP between March and May. In fact, activity continues to show a 5% drop compared to the pre-pandemic level.

According to him Institute of Labor and Economics of the Germán Abdala Foundation (ITE-FGA), in November there was an improvement of 1.3% compared to October levels. According Orlando Ferreres and Associates, the increase was 2.6%. Until now, the economic rebound was driven by the reopening of sectors, from supply, and the rebuilding of stocks, with consumption still somewhat more timid.

In November, that did not change completely, but consumption began to show signs of life: according to CAME, the contraction of the month for retail consumption, which was 6.7% year-on-year, was the lowest since the pandemic. According to him ITE-FGA, consumption grew 3.8% compared to October. Along these lines, the collection of VAT December, which mainly accounts for household spending during November, showed a real growth of 11.4% year-on-year, unprecedented in a pandemic (the DGI VAT fell 0.8% in real terms and was also the best record since the Covid arrived -19).

The dynamics of the dollar in external balances

There will be two key posts on currency dynamics during December. On the one hand, Indec will publish the Argentine Commercial Exchange (ICA), which will show what happened in the foreign goods market, according to Customs data, that is, according to the accrual. Later, on Friday, the BCRA will publish the MULC Evolution Report, which will show what actually happened in terms of the entry and exit of dollars, both in the goods market and in the financial channel: the flight, the payment of debt of companies, government interest payments and what happened with tourism.

Both reports, complementary and monthly, were fundamental to explain the economy throughout 2020. The exchange rate gap, as a representation of the expectation of devaluation, stuck the tail in the official dollar and first generated a delay in export payments and a advance in imports, affecting the supply and demand of foreign currency and putting pressure on reserves. The oilseed and cereals sector was the main actor in the exchange rate pressures of the year.

Later, the dynamics went directly to the shipments of exports and imports themselves (it went from advancing and delaying payments to doing so with external sales and purchases themselves). That change began in September: exports plummeted and showed average contractions of more than 20% year-on-year and imports stopped falling and even rose 20.7% in November. Although there is some economic reactivation, the data exceeds it and is explained by exchange rate dynamics.

From the LCG consultancy they expect a continuity of the phenomenon to be reflected in the December data, although with a slowdown in the export contraction. This will translate into a new current account deficit in the foreign exchange market, in line with what happened between August and November, when the red was USD474 million a month on average.