One day after the communication of 6.6% inflation in February, former Economy Minister Domingo Cavallo spoke with Clarín about the consequences and prospects of the inflationary acceleration unleashed in recent months. The rate in February increased compared to January (6%), the annual rate exceeded 100% (102.5%) and is already the highest since October 1991, just when Cavallo was minister and had already launched the Plan of Convertibility.
“I’m in Córdoba for a meeting,” Cavallo began. “Let’s talk now that I’m on top of a car.”
– Not necessarily. I predicted what we’re seeing today, that we would have an average inflation rate above 6%, that’s 100% a year, for the whole year. We could have a month closer to 6% or higher than 7%. But we will be there. For there to be runaway inflation like the Rodrigazo, things have to happen like the government confirming a devaluation jump or liberalizing it without unifying the foreign exchange market, or if not, being forced to do so. But the government won’t do such a thing unless people, companies, etc. recite. But as long as the government and the BCRA have some power and make the rules, inflation can be 6% or 7% a month, but not out of control.
– Peronism, which does not even have the possibility of forming the next government, will always prefer that the next president clarify the prices to correct the distortions accumulated in this period. Because once this task is tackled there will be inflationary acceleration.
– If Alberto Fernández for some reason does not continue to lead the government and Cristina Kirchner is forced to take over the administration, a political crisis will ensue which could give rise to an immediate inflationary rampage. But I don’t think that will happen except for the health of the President and that’s why I don’t want to speculate.
– The position of Cristina Kirchner and La Cámpora on the default of the IMF would scare everyone and any promise made by the government to service the debt in pesos or dollars would be without effect. Then they would be forced to issue to meet state payments, the unions would demand higher increases and inflation could accelerate even more because of this political crisis that I am raising. The hyper that happened to Raúl Alfonsín was more due to the political crisis than economic mismanagement. When Eduardo Angeloz asked Alfonsín to replace Juan Sourrouille with another economy minister, inflation began to spiral out of control. Today, for the time being, the Government avoids this lack of control.
– That the inflation rate is kept at 6%-7% per month and does not get out of control. It was silly of you to say you would drop the rate to 3% a month. So far he has proven to be something of a wizard for handling this situation in a government with such different views.
– It could increase electricity tariffs which the Government has been deferring since last year for customers with greater purchasing power and I don’t know why they don’t. On the other hand, the adjustment is made by inflation because retirees are paid less as the formula is corrected by the price increase but it is always late. The government is at a sort of impasse with inflation and the IMF.
– If the government had a modicum of international credibility, Argentina would be able to argue in favor of calling for special drought support. Mauricio Macri was approved for 54,000 million dollars in aid from the IMF and they gave him 44,000 million dollars, he never left for the remaining credit. It could therefore be argued that this credit was granted to receive fresh money and thus compensate for the decline in exports due to the drought. It would require US political support as Macri got it from Trump. The government is unable to make this statement because his speech is very contradictory as a result of the fact that they are a lot of cats in terms of economic policy. But even so, if it gets along with Washington, Argentina could win US support.
– You can’t estimate that number. It all depends on the adjustment sequence, the degree of credibility of whoever does it and what the starting situation is. It is not the same to speak today as on December 10, 2023. The next government will know. Difficult to make predictions at the moment.
Source: Clarin
