The days of the electoral campaign in which Javier Milei ran as a candidate are long gone he declared it from the rooftops I would never set a price in dollars, which would be defined by the forces of supply and demand.
When you choose Luis Caputo as Minister of Economy, a fixed exchange rate lover In times of uncontrolled inflation, it showed the first strategic change regarding exchange rate.
For starters, Caputo’s bet a strong devaluation (the official dollar jumped 118% in December) and then “nailing” the official dollar (800 dollars with monthly increases of 2% for January and February) has been rethinking in recent weeks the discussion whether the government should devalue again, accelerate the rate of rise of the official dollar or take other decisions.
Argentina’s history since 1970 shows that a skyrocketing and restless dollar (floating without dollars, for example, or an exchange rate gap greater than 60%) drives inflation and the collapse of the purchasing power of salaries and pensions.
For families, the result of pensioners’ incomes and salaries in the months of December and January was more than eloquent and palpable.
The former minister Dante Sica proposes four options which, among others, Caputo has:
- Acceleration of the creeping picket (the official dollar now rises by 2% per month), which is considered the “most logical” in a transitional exchange rate regime still with high inflation.
- Unification of exchanges: adjust the official dollar to the value of the “blend” dollar (80% official dollar, 20% counted with liquidation) and eliminate the “blend” (in the agreement with the IMF it is for June).
- New jump in devaluation: The government will try to avoid it. It will only be done if reality requires it.
- Dollarization: The government’s explicit long-term goal is not currently achievable.
Minister Caputo insisted this week that he is not contemplating another jump in the dollar in a bid to reinforce the official message that inflation was headed lower in February as he aims for a cost-of-living rise of less than 10% in April , or in May.
In recent weeks, a broken debate has persisted (almost like the fans of Boca and River, although, obviously, with more education) among the economists who support the position of Sunday Horse From devalue faster promote the liquidation of export and export dollars Ricardo Arriazu, who insists on telling the team that they have to do it “nailing” the dollar to support the decline in inflation.
In the middle appear the arguments of a supporter of a high and fixed exchange rate such as Martin Rapettione of the administrators of Equilibra.
To demonstrate his support for the dollar shift, Rapetti says that when Milei won the second round, a ton of soybeans was trading at around $500 and is currently at $415, a decline of 17% in dollar terms.
And he also puts it in pesos: a soybean producer today receives 250,000 dollars per ton, when in November he received 300,000 at current prices and in December after the devaluation 430,000 dollars.
So far the market believes the government. A gap between the dollars of around 20% and the country risk falling to 1,583 points reflect this credibility.
But we must also take into account that the blue dollar is at 985 dollars after having been at almost 1,300 dollars It caused many savers to lose money.
In addition to “window of opportunity” To sell expensive dollars and buy cheap goods, traditional Argentine devaluations are closing at an accelerating pace.
An example that Sica gives is that the dollar, tending towards backwardness, “makes the sale of brand new properties more expensive and at the same time puts pressure on the price of second-hand property”. Mattress dollars have lost value.
Argentines’ main savings tool and store of value is changing: Dollar deposits in banks grow and the criticized peso deposits lose against inflation, but gain on the coveted dollar.
Source: Clarin
