Six months ago the blue dollar reached $990, the same closing value as yesterday.
From that October 10, 2023 (it in fact exceeded 990 dollars and closed at 1,010 dollars), on the eve of the presidential elections and beyond the intermediate ups and downs, The blue did not stop rising until it reached $1,255 in mid-January. The culmination occurred when the CGT carried out the first strike against the government of Javier Milei in parallel with the debate in the DNU Congress and the Omnibus bill promoted by Javier Milei.
The dollar then began to fall. Despite the legislative failure of the ruling party, and perhaps because the government demonstrated that the objective of fiscal balance was not at stake because it would have resorted to other measures to achieve zero deficit, from then on the weight would become heavier.
However, inflation continued to rise throughout this period while the dollar was declining. Corollary: some lost money. It’s a lot. Others have won. And a lot too.
Who lost?
Let’s say someone bought the blue dollar in October 2023, before the election, paid $990 and kept it. Today if you sell it they give you the same amount of pesos as six months ago. But buy fewer goods. Accumulated inflation in these six months (assuming that February was at 15% and March a similar figure) it would be about 150%.
Many need to sell more dollars today to buy the same products or cover expenses.
Who won?
If a week before the October elections someone had sold $1,000 and invested that $990,000 in a fixed term at 11% per month and rolled it over, they would have won today almost 90% in dollars. An investment that cannot be found anywhere in the world.
Has anyone seen it? Some investors do this.
But the big winner of this dollar fall is Javier Milei. “The President is taking his time until the May Pact and with this appreciation of the exchange rate he has more chances to show a decline in inflation”confesses an important leader of Peronism.
The dollar’s flight before the 2023 presidential election, and continuing until January, was explained by several reasons. Excess weight due to Sergio Massa’s measures (Plaita plan), the Central Bank’s lax monetary policy at the end of the pandemic and, of course, political noise: neither Massa nor Milei had incentives to cooperate and reach a Nash equilibrium in the countryside ( a theory that a better optimum can be achieved if all actors collaborate).
Today the government seems to have dispelled that political noise. Even more so after Milei’s speech to Congress, which he asked for the May Pact and agreed with the governors on a 10-point document.
Furthermore, the dollar falls for other reasons: the decline in liquidity due to the monetary policy of absorbing the peso, the more restrictive fiscal policy and the greater liquidation of the countryside, essentially.
The million dollar question:the dollar is worth about $1,000 and with inflation that is not yet clear whether it will reach single digits towards the middle of the year?
Ramiro Castiñeira, Econometrics economist, warns about this. “Delaying the arrival of the dollar would force us to burn reserves that do not exist, to take on debts that are not available, or to impose a crackdown, which we try to remove”says the economist. “Therefore, The future will not be characterized by an exchange rate lag because there are no reserves, no ability to borrow and soon no stocks. Furthermore, for the purposes of replenishing reserves, the dollar cannot lag behind in exchange rates. A free dollar is what ensures there is never a shortage of dollars in the economy.”
The IMF would agree with what Castiñeira says. This was stated by Gita Gopinath, number two of the Fund, during her recent visit to Buenos Aires. Argentina must not leave the dollar behind and must make decisions on currency restrictions, i.e. define a monetary/exchange rate regime. So is it time to buy dollars?
The market didn’t see that in October. Will you see it now?
Source: Clarin
