The government’s decision to use the dollar as inflationary anchoring and his plan for raise the trap mid-year He opened a new front with one of his mentors. He was the former Minister of Economy, Sunday Horsewhich questioned the consistency of the financial indicators and recommended to accelerate the devaluation of the official exchange rate in order to lift the shares, a proposal that it was rejected bluntly by Javier Milei.
“What kind of stupidity is this that I have to blow up the exchange rate when in reality the exchange rate is aligned with the market rate? They should be more respectful of individuals’ decisions and Don’t be so arrogant. In other words, as (economist Friedrich) Hayek says, fatal arrogance, because behind this there is a problem of fatal arrogance, which is believing one knows What is the equilibrium real exchange rate?“Milei said Bloomberg last week.
According to the president, today there is a “Floating” exchange rate. which is the parallel exchange rate and which is “free”. That way, the gap with the officer corrected by COUNTRY tax (17.5%) –the importing dollar– is “zero” AND The parallel would coincide with the market or equilibrium exchange rate, since both prices today fluctuate around $1,010. And in another interview he seemed keen on lifting the trap in the second half.
After the sharp devaluation in December, the government maintains its position policy of increasing the official dollar at 2% monthly with inflation persisting above 10% monthly. The thesis is that the Central Bank has managed to purchase $12,000 million in reserves, the currency gap has narrowed and inflation is heading towards single digits. But Horse warns that, although the financial indicators are “encouraging”, He doesn’t see that a sharp drop in inflation “is on the horizon.”
First of all, the father of convertibility linked the reduction of the price level with a “sharp decline” also in the level of economic activity it’s a increase in prices measured in dollars, at both the official exchange rate and the free exchange rate. “For this reason, attention should be paid to the evolution of the real exchange rate on the official market and the evolution of dollar deposits in the banking system,” he noted in his blog.
For the former Minister of Economy, dollar inflation is one indicator typical of when consumers and producers begin to suspect or demand “jumps” in the price of the dollar. On the other hand, he denied that cash with settlement (CCL) was a “free” exchange rate due to restrictions in place to access that market and is skeptical of Milei’s expected deadlines for retracing the stock.
“I don’t think it will be possible to successfully reunify and liberate the foreign exchange market in the middle of the year,” he warned, underlining that if the pace of devaluation (creeping picket) were not adjusted at a rate closer to inflation, “dollar production costs would tend to increase toward levels that would discourage export and import substitution activitiesputting the trade surplus at risk.”
In this painting, Horse proposed the “formal development” of the foreign exchange market as a condition for abandoning the shares (without official intervention on the financial market) e “adjust scan” in the commercial market to eliminate the gap. According to a report by Fundación Capital, if inflation did not fall to single digits more rapidly, maintaining the current exchange rate policy would imply lose all the competitiveness acquired in June since the December leap.
Milei is seeking $15 billion in financing to lift the restrictions, but the IMF reaffirmed this last week you need to “adjust” the exchange rate and interest rate. With no intention of moving forward on this path, the economic team Nor does he foresee any changes for now with the “blend” dollar, which is regulated at 20% in the CCL. This was communicated to the exporters, as far as he was aware Clariondespite the fact that its impact was dampened by the smaller exchange rate gap.
In this context, while the Government awaits the imminent arrival of the large harvest, the field holds grains pending an exchange rate adjustment or a reduction in withholding taxes. Agriculture contributed about $1,466 million in the first quarter, 570% more than in 2023 (with drought), but 40% less than in 2022. And there is still 78% of the new soybean campaign left (almost 40 million tons) without negotiating, according to consultant Lorena D’angelo.
Source: Clarin
