Concerned about inflation which will continue to be high in February (15% is expected on Tuesday), the Government maintains the dollar is well behind rising prices and rates will continue in negative territory, waiting for companies to relax price fixing. This was the message that the team led by Luis Caputo sent to the private sector in recent days.
Although the Minister of Economy is keeping the path of the official dollar under lock and key, last Thursday he shared some graphs with the CEOs of 17 mass consumption producers to show them a projection of the exchange rate. “Caputo made a dollar projection to say this “It will cost less than food companies estimate” official sources indicated.
In this way, the official confirmed that the devaluation rate (currently 2% monthly) will be less than the CPI increase, at a time when entrepreneurs are asking him for a roadmap to get out of the trap. He also showed the fall of the dollar, the repurchase of reserves, the increase in bonds and the reduction of the deficit. The CEOs couldn’t get a copy, but it was clear to them They should expect “no jump in the exchange rate”.
On the other hand, since last week rumors have begun to circulate of a new cut in the Central Bank’s reference rate compared to the current level, which today runs below inflation expected (at 8.33% nominal). For some economists, the measure would serve to support private credit or continue the liquefaction of the peso. From the economic team They assure that “there is nothing”.
Milei’s strategy is stabilize the economy with a fiscal adjustment, liquefaction, the accumulation of reserves, the validity – for now – of stocks and the recession, which pushes private companies to sell dollars and lower prices. The latest inflation measurements, however, have raised alarm bells in official offices, in particular the sharp rise in above-average food prices.
According to LCG, foods they increased by 3.6% on a weekly basis in the first week of March, accelerating by 2.3 percentage points compared to the previous week, while the Latin American Foundation for Economic Research (FIEL) recorded a rebound of 5.7% in the last 7 days in the City, implying a average monthly inflation still high. And in March, the decline could be stopped.
Caputo pulled the rug out from under food producers’ feet last Thursday, after reminding them of the concessions to the sector with the elimination of controls on prices, imports (SIRA and SIRASE) and packaging (SIFIRE). “Don’t keep sailing, We see that they are increasing a lot every month, that was the message we read,” said a businessman.
This dynamic puts pressure on the exchange rate, as by April almost all of the exchange rate advantage generated by the December devaluation would be lost, and in recent months Argentine goods and services have become significantly more expensive, with a parallel dollar below $1,000. But the Government for now prefers to avoid a devaluation or acceleration of the exchange rate to anchor prices.
Source: Clarin
