Sergio Massa, faced with the inevitable: a devaluation

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The historic drought suffered by Argentina, which has already begun deposit its impact on economic activity forced the economy minister to accept the inevitable. A weight devaluation to compensate, even partially, for the loss of 20,000 million dollars product of the lack of water and the drastic drop in agricultural yields.

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Of those 20,000 million dollars, a third should go to central bank reserves. The economy has resigned, perhaps prompted by the staff of the IMF, to run a manual measurement: raise the price of what is scarce. And the ones that are in short supply are dollars.

Massa will have to raise the barriers and accept a much greater devaluation, although not yet widespread. If until now carrots have benefited exporters of soy and insinuated to Malbec dollarDue to the reserve crisis, on this occasion the strengthened exchange rate will reach the rest of agricultural products. The list is not yet known, nor the price. But it won’t be far off $300.

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Logic would indicate that importers would also have to pay a higher exchange rate than they are paying today -$208-. We have already begun to see something on Wednesday, with an AFIP regulation which removes tax breaks from importers.

But it would not be logical – even if you never know – for the Centrale to pay 300 dollars to exporters, dollars which it will then sell to importers at a price 50% lower.

From now on, the problem is the impact on inflation of a measure of these characteristics. The same officials never tire of saying -José Ignacio de Mendiguren, the first one- that the last thing Argentina needs is a devaluation that will trigger prices even more.

This exchange move could be written in something already known: “devaluation without a plan”. The plan would be all the rest that is needed, and that it is impossible, at this point, to expect from this government. The election result will be what will let us know what that plan is. For now, Massa would be resigning himself to doing the dirty work. Or a part.

Source: Clarin

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