URGENTE 24 – The former Secretary of the Treasury and a member of Fundación Libertad y Progreso estimated that the exchange gap would be resolved through an appreciation of the official dollar. He estimates that after quarantine is lifted there will be more pressure on inflation.
Manuel Solanet graduated in Civil Engineering from the University of Buenos Aires. However, its long history is linked to the field of economics. He has been Secretary of the Treasury of the Nation, President of the National Institute of Economic Planning and member of the Commission of
Economy of the Buenos Aires Stock Exchange, among other positions.
He is also president of INFUPA S.A., from where he assisted private groups in the privatization of telephone, rail and electric power companies during the 90’s.
Solanet is also Director of Public Policies at Fundación Libertad y Progreso, a think tank “of critical thinking and applied research to solve citizens’ problems, promoting the values and principles of the Federal Representative Republic.”
In an interview with the newspaper El Liberal, from Santiago del Estero, Solanet estimated that a strong appreciation of the exchange rate will follow the exit of the pandemic, which will put more pressure on the country’s inflationary problems.
He considered that the inflationary effects of the current monetary issue, which took magnitude to finance the needs derived from the quarantine, are being mitigated by “a strong recession, there is price and tariff control and there is also a phenomenon of increased liquidity in the hands of the public in quarantine”.
“The stocks have allowed it to absorb part of that emission, but that generates uncertainty for the future,” he added.
According to Solanet, when the quarantine passes and people can consume, “this excess liquidity is going to be poured into prices and this is very dangerous because there is also a very strong exchange gap.”
Regarding this, he estimated that -as historically has happened- the exchange gap will be shortened “not by a reduction in the parallel dollar but by the increase in the official rate, that is, a significant devaluation.”
According to the ex-secretary of the Treasury, “this generates a strong uncertainty about the end of this year.” “Because there is a certain risk that inflation will take other levels. It is very difficult to say when it will happen, what is certain is that it will happen, there will be a significant devaluation.
Solanet said that the emission limit “has already been exceeded”, but that the printing of pesos will continue “this coming month and as long as they have some rigidity in the quarantine, they will have to continue doing it, otherwise the companies will just die there.”