“The risk of a Rodrigazo has not disappeared”, Domingo Cavallo underlined in one of his usual analyzes on his personal blog. The former Economy Minister also recalled that “the control of public spending It is the only instrument that the Government has at its disposal to prevent the inflation rate from exceeding 6% per month”.
For Cavallo, the ghosts of Rodrigazo are something recurring in today’s Argentina. Last September Cavallo had indicated that the freezing of some prices, together with the devaluation through inflation, were “Dangerous Experiments” and together with other variables could start a Rodrigazo.
“The risk of a ‘Rodrigazo’ has not disappeared especially if instead of applying effective measures to control public spending, we appeal to creative accounting,” said former Economy Ministers Carlos Menem and Fernando de la Rúa.
for horse, “With creative accounting, the government won’t be able to influence inflationary expectations.” On the contrary, “the lack of clarity in the fiscal accounts only adds uncertainty about the path of inflation in the coming months,” he said..
In this sense he continued: “I continue to think that it is the best result that Sergio Massa can achieve is that the average inflation rate does not exceed 6% per month (or 100% per year) until the end of the year”.
“Controlling public spending is the only tool the government has at its disposal to prevent the inflation rate from jumping above 6% a month,” said the father of Convertibility.
Along the same lines, explained the economist “although it was attempted to do so in the months of December and part of January, the government will not be able to further delay the official exchange rate. Nor will it be able to lower the interest rate or sterilize more than the expansion of the monetary base.
“Worse, if he tries to use any of these tools, he risks a plateau in the monthly inflation rate of around 6% per month and increases the likelihood of a devaluation jump capable of generating a ‘Rodrigazo’,” he said. . she said.
What was Rodrigazo
“Tomorrow they’ll kill me or tomorrow we’ll start doing things right.” With that sentence Celestino Rodrigo explained what he would do the next day, on June 4, 1975: neither more nor less than the “Rodrigazo”. AND
The new economy minister took office on June 2, after having been secretary of the social security. He had been catapulted into that position by decision of the Minister of Social Security, José López Rega, the man who really held power in the government of Isabel Perón. And it was after that in May of that year, his predecessor Alfredo Gómez Morales said: “I no longer have what to do in government.”
In fact, the crisis was falling unstoppably with an index of the cost of living that in annual terms, in May, reached 80.5%, It’s inside wholesale prices, at 75.4%. However, the intense expansion produced in the first year of the Justicialist government since May 1973 continued to bear fruit and unemployment stood in April 1975 at an unusual level -for the indices of the following decades- of 3.2%.
The “Rodrigazo” consisted in devaluing the legal weight, bringing it from 10 to 26 as regards the trade dollar; the financial dollar went from 15 to 30 pesos by right, and a new tourist exchange rate was created, at 45 pesos. Gómez Morales, in March, had already raised the commercial exchange rate from 5 to 10 pesos and the financial one from 10 to 15. Electricity rates rose from 50 to 75%. Super petrol, 172% and ordinary petrol, 181%. Same other rates. Never in Argentina had there been such an adjustment of relative prices, nor so much inflation and devaluation, plus a recession that ended 11 consecutive years of growth. And all against the backdrop of a power vacuum following Perón’s death in 1974 and a spiral of violence.
Rodrigo, who had been an official in the first Peronist government, hoped to remove expectations on the parallel dollar, which was climbing unabated.
However, this continued. After a month and a half, Rodrigo devalued again. Meanwhile, international reserves were deflating, falling from $1,400 million at the end of 1974 to $700 million in June 1975. The prospect was an imminent cessation of payments on an external debt of 10,000 million dollars.
Rodrigo wanted to bring prices closer to wages and then stabilize, in the midst of a liberalization of foreign capital embodied by his deputy minister, the banker Ricardo Zinn, author of the slogan used after the 1976 coup: “Narrowing the state is enlarging the nation”. Zinn especially wanted to pay off commercial debts.
But trade unionism rejected the proposals of the Isabel-López Rega-Rodrigo trio that capped wage increases for parity to 38% and then 40%. On the other hand, unions won hikes of 70% or more, as the Liberal sector winning government abetted a blowout that would have ended the previous price controls, in effect in 1973/75. Many union conventions that regulate today were signed then.
The president consulted with López Rega, who remained uncompromising. AND the CGT decreed a vigorous 48-hour general strike accompanied by militant trade unions.
Rodrigo made a dramatic appeal on TV to the country to accept his plan, no effect. On July 21 he resigned, two days after López Rega fled the country. Rodrigo was imprisoned for almost 4 years on charges of irregularities in Isabel’s government.
NS
Source: Clarin
