Marina Dal Poggetto: “Without credit, without money and inflation of 7% per month, the ability to graduate was lost”

“Any stabilization program requires a horizon and governance. Governance to make decisions that have immediate costs and in the horizon so that those decisions are not canceled with the elbow in the next administration “, this is the balance of the current situation Marina Dal Pogetto, one of the most respected economists of the Municipality, who has recently refused Sergio Massa’s offer to join his economic team,

The director of Eco Go participated in two days of debate organized by the Austral University, “Dollarisation versus other alternatives”where they discussed the alternatives that the country has to get out of its currency crisis and analyzed the cases of neighboring economies, which have chosen to dollarize to avoid some shocks.

“Over the past two decades, what we have done is break the currency again.”, Marina Dal Poggetto said at the end of the meeting. “All the economies in the region, excluding Venezuela, have taken advantage of the weak dollar and high commodity prices of the past decade to support the construction of their currency and prioritize price stability,” the economist recalled. .

“In Argentina we build inflation. After the exit from convertibility, all inflationary inertia mechanisms had been broken, but there were extraordinarily expansive policies: fiscal, monetary and income. And this has allowed it to grow at Chinese rates “, said Dal Poggetto, retracing recent history in financial and monetary matters.

The economist pointed out that since the installation of the foreign exchange trap, the Argentine economy has been stagnant since 2012: “There has been a zigzag growth, a delay in the exchange rate in the election year and then what we have had is was the recession with Macri in 2018 and 2019, the pandemic and the rebound of the last two years financed by expansive monetary and fiscal policies, “he specified.

Dal Poggetto focused on the inflation rate in the current administration, which reaches 190% against the 300% accumulated in the four years of Mauricio Macri’s government, and explained that in the current process the particularity is the “dispersion of prices: “The prices of goods in Argentina are ridiculously high in dollars and on the other hand those of public services are ridiculously cheap, in dollars “.

Furthermore, he highlighted: “Today wages lag behind prices, they lost 23% compared to 2015 “.

In his analysis, Dal Poggetto included the exchange gap. “Hoy the free exchange rate is at an overshoot level also compared to the dollar price at the end of convertibility, while the official dollar is overduebut it is still an exchange rate that is above the periods of strong lagging of the exchange rate.

“These levels of gap are not sustainable”the economist assured and explained that, behind this indicator, there is “The failed balance sheet of the Central Bank. Dollars lack reserves, what was bought with the external surplus was consumed to pay dollar debt and finance imports, and there are surplus weights in the economy.

“Today there are pesos that create pesos, with rates that until now were negative but are starting to get higher and higher. The Central with a gap greater than 100% does not buy dollars and, as a counterpart to the interest rate, those pesos generate more issues “, he explained,

In this diagnosis, Dal Poggetto assured that the agreement with the Monetary Fund aimed to reduce the imbalances of the economy without a “shock” therapy.

“The attempt to gradually correct relative prices condemns rising inflation. From the point of view of the objective objectives of the agreement, the objective of reducing the deficit has been very gradual and is not achieved, the objective of reducing monetary financing is much more aggressive than the fiscal objective, but it is set in a market in debt cornered into pesos. ”

“The acceleration of inflation, the dispersion of relative prices and the gap condemn an ​​ever greater acceleration”. In this sense, for the economist, a stabilization program requires “the necessary correction of relative prices. Correction of relative prices necessarily implies a narrowing of the gap and this implies a devaluation ”.

For the economist “without credit, without currency and an inflation rate that runs at 7% per month, the ability to gradual has been lost. The agreement with the Fund has allowed gradualism in a certain way, but condemns even higher inflation “.

At this point, the economist pointed out that a foreign exchange correctiona, it could bring the official dollar from the current $ 135 to $ 250. “This generates some additional resources from a fiscal point of view, a sharp increase in the costs of public services and this consequently a governance problem“, he acknowledged.