The discussion about effectiveness of price controls that the Argentine government is trying to implement has arrived in Boadilla del Monte, a city on the outskirts of Madrid where the financial city of Santander is located, where the International Banking Conference was held on Thursday. Indeed, the discussion lasted two minutes. And it happened when Rodrigo Park, chief economist of Santander Argentina, was asked two things: 1: his impression of the effectiveness of controls and 2) whether the Central Bank – ultimately the governing body of monetary policy – could do something more than seen so far. Short answers: no and no.

“The truth is that the price controls they are not effective in the long term and they are also useless if they are not part of a broader concrete stabilization plan. And about the Central Bank I can say that it has its tools but that they do not work if they are not coordinated. What Argentina needs is real coordination between monetary and fiscal policy. The Central Bank can bet -ex ante- on the setting positive real interest rates, above the expected inflation today, but what we have seen is that inflation always ends above expectations. Raising interest rates is also not effective, because every point where the rate increases, it increases quasi fiscal deficit for the huge debt in Leliq that the plant accumulates ”.

Park made a brief review of what the Argentine economy is today and insisted on the need to establish a macroeconomic policy consistent with the stabilization of expectations. “Fiscal prudence is a priority,” she summed up. An online comment with what she did the day before Ana Botinthe global leader of Santander.

Beyond this troubling landscape, Park has made an effort to highlight, as Botín did Wednesday, that the country has the potential to emerge from the long recession –“GDP per capita is the same today as in 2011”– if they can agree on basic policies to quickly achieve fiscal balance, an essential condition for starting to bring order to the economy.

Park spoke on a panel in which he and his colleagues in Brazil, Mexico and Chile examined the economic progress of their countries in a global context of high inflation, central banks raising interest rates to curb it, and a longer growth horizon. low.

The Brazilian economist Ana Paula Bishops, He referred to two issues concerning the relationship with Argentina: the creation of a common monetary authority that the Argentine government has asked for and the future of Mercosur.

As for the first, he admitted it he sees it far away because first you have to do converge macroeconomic variables and today the two countries are in different worlds. Brazil trying to grow with a fairly solid fiscal policy and Argentina in its particular reality of very high inflation and growing uncertainty.

As for Mercosur, one of the most protectionist economic blocs, he stressed that it is important to resume talks with seal the delayed agreement with the European Union.

Brazil and its fight against inflation

One of the most important figures of the International Banking Conference was the head of the Central Bank of Brazil, Roberto Campos Netformer director of Santander Brazil, arrived at the helm of the Central Bank at the hands of Jair Bolsonaro and everything indicates that it will remain there at the request of President-elect Luiz Lula Da Silva.

Campos Neto is celebrated as the central banker who it reacted earlier than anyone else with rising interest rates to curb inflation. It started in March 2021, bringing the Selic rate from 2% to 2.75%. Today the Selic is at 13.75%. In exchange for this monetary tightening, Brazil is now the only country in the world that can show three consecutive months of falling inflation rate. Banker Ana Botín showered him with praise.

Campos Neto explained his monetary tightening strategy as the right medicine for what it perceived as inflation that would not have been transitory. A different reading from what the US Federal Reserve and the European Central Bank had until last year. He came to that conclusion after evaluating the impact of liquidity shock that governments have applied to address the devastating effects of the pandemic on the economy, demand shock once the economies and the power shock of goods and energy (after the Russian invasion of Ukraine) that resulted from this rapid reopening. Namely: the supply of goods and services has grown more slowly than the demand.

The Brazilian banker warned that central bankers must today find the right tone for monetary policy: “We run the risk of being too hard at first or too soft. In the first case the cooling of the economy can be excessive, in the second case the risk is lose credibility. You have to navigate between these two errors. He welcomed rate hikes in the US and Europe because “this means we will stop importing inflation”. In conclusion, you warned that in order to ensure growth, great care must be taken not to increase the tax burden on capital, which is precisely what will finance the expansion of production that normalizes the supply of goods and services.

For its part, the chief global economist of the Santander Group, the Argentine Giovanni Cerruti, pointed out that the world has suffered two shocks in a short time that have put economies in a situation not seen in several decades: stagflation. And he stressed that to get out of this trap, 8 out of 10 central banks have already chosen the path of monetary tightening. But he pointed out that Latin America as a region is going through the Federal Reserve’s policy of raising rates quite well because its economic fundamentals are relatively better than in previous crises, basically because they have a good fiscal position and most countries are managed to get the most of its debt is denominated in local currency. And because the prices of raw materials remain at very attractive levels. His impression is that the recovery of the economies could begin to be seen in the middle of 2023. He was talking about the region, not Argentina.