The Worst 72 Hours a Central Bank Can Have: Raising the Dollar and Blowing Up the Cabaret

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─ “Alberto and Mauricio need to talk. Tell Alberto that I am available, give him my contact, call me and I will facilitate the dialogue with the president”.

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Guido Sandleris, president of the Central Bank, almost pleaded Matías Kulfas and Axel Kicillof, economists close to Fernández, and the opposition and space candidate Frente de Todos (Kirchnerism), who had prevailed in the 2019 primaries by more than fifteen points of difference, contacted the then president. A few hours had passed since a setback for Macri which meant reviewing Peronism very close to the presidency and triggered an infinite number of declarations – from both sides – which did not facilitate the task of conducting economic policy:

– “Alternative K has no credibility”Macri said Monday morning after the PASO result and before markets opened.

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– “It is the government that must manage the dollar”Fernández said a few hours later, in the midst of a financial and exchange tsunami.

The previous Sunday, around eight in the evening, before the primary results were announced, Macri spoke with his then economy minister, Nicolás Dujovne.

“Think about what we will do tomorrow because we lost by 15 points. They were all wrong.”

Dujovne, who attended from Costa Salguero where the party in power had gathered around a buffet to wait there for the first electoral data while all the collaborators approached and commented on the exits, quickly went home, where he gathered the team of collaborators and reviewed the numbers of the economy to take action in the following hours and present a reaction plan in the face of the new electoral challenge that was approaching: reverse those 15 points.

An hour and a half later, Dujovne returned to the bunker to attend a meeting with Macri. And the next morning, before the market opened, they both met Sandleris in La Rosada. The exchange rate would not intervene.

The dollar was up 23% that day, from $46 it closed on Friday at $57.3. According to market sources, the BCRA “hasn’t been on offer all day.”

Statements from politicians did not help.

“We don’t blame the people for how they voted, but it is interesting that you analyze the effects of that vote. it’s impactingsaid Miguel Ángel Pichetto, Macri’s racing mate.

Fernández, 24 hours after winning the PASO, lashed out at the Central Bank saying: “Macri wants to talk to me and leaves Sandleris, who doesn’t even have an agreement with the central bank and is president usurper which devastated Argentina’s currencies”.

Martín Redrado, former president of Central, played him “The BCRA was observing from the platform what was happening in the market instead of intervening (…) My colleagues were instructed to exit the market”. His statements angered Sandleris this week, as he recalled in a tweet, and which coincided with his nomination by Horacio Rodríguez Larreta as a member of his cabinet for the 2023 presidential election.

The jump that the dollar made that Monday after the 2019 PASO was greater than the one recorded on the day Cambiemos removed the shares in late 2015or even when Macri rushed in front of the cameras to ask the IMF for a new package without having previously discussed it with Dujovne and the agency itself. “His Time Is Up”, announced the British newspaper Financial Times after that day when the shares of Argentine companies plunged more than 60% on Wall Street and the Merval fell 33% at midday. If the pre-PASO index was worth $970, it closed at $490 on Monday. “It was probably the biggest impairment in Argentine history in one day”once said Fernando Villar, Wealth Management Financial advisor at Bull Market Brokers.

Sandleris reached out to Kulfas and Kicillof, the leading economists in the Kirchner space, to foster a dialogue and calm the variables.

Furthermore, the IMF was beginning to give signals that, given the probable change of administration and the accusations it was receiving from both sides — from Macrismo because they said they received permission to intervene in the foreign exchange market too late and from Kirchnerismo because they accused granted an unpayable loan, it was better to distance oneself.

“Be calm. They explained to me that you did the right thing.”Fernández told Sandleris that same week, after Kulfas intervened.

The president of the Central Bank insisted that the candidate of the Frente de Todos speak with Macri. The FdT candidate justified his reaction. “He accuses me that I will lead the country to be like Venezuela and this causes panic in the markets.”

Both managed to talk days later.

“I talk to him about economics and he doesn’t understand me”Macri translated into his own after seeing Fernández.

Fernández, for his part, turned around and said: “Macri is wrong, he doesn’t see it”.

In between are the economists and the dollar.

Source: Clarin

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