Cafiero denies devaluation, but economists say it is inevitable

EL LIBERAL – The Government once again rejected the possibility of encouraging a sharp variation in the exchange rate, understanding that the economic measures in place will show their effect on the market in the medium term together with a gradual increase in the supply of foreign currency and progress in an agreement with the International Monetary Fund (IMF).

The Chief of Staff, Santiago Cafiero, insisted that “the Argentine economy is not adjusted by the blue dollar” and that “today nothing tells us that the official exchange rate, which is where the economy is governed, should be much higher than what is ”.

“We have to generate policies so that there is more supply and they are long-term public policies, there is no greater supply with a single measure, that does not exist,” he said.

For her part, the Deputy Chief of Staff, Cecilia Todesca Bocco, said that the gap in the dollar will decrease “to the extent that progress is made in the medium-term objectives and is not solved with a brutal change in the Government”, referring to a strong devaluation.

“The gap will not give way in the short term, because the problems of the exchange market reflect structural problems,” said the official, assuring that confidence will be gained “as economic policy advances more in the objectives set they raised in the medium term ”.

“Generating a strong devaluation, what will happen is that prices will rise, real wages will fall and the economy will contract even more, because devaluations are contractionary,” said Todesca Bocco.

The President deems it necessary to “order the stock market”

President Alberto Fernández affirmed that it will be necessary to “order the stock market” of currencies, where the MEP and CCL dollars are listed with gaps of almost 100% with respect to the official one, and that, also, the program that is managed to close will be “fundamental” with the IMF to remove volatility from the currency. In addition, she admitted: “I tried to put an anchor so that dollars stop coming out, but I was not very successful.”

“On Friday we were seeing with Martín Guzmán that we must work to order the stock market. For this, it is essential to organize ourselves in a program with the Monetary Fund, which on Tuesday sent its technical group for the first time, ”said the President in journalistic statements.

“In the context of the fiscal programs with the Fund, we will be able to sort out the currency problem,” said Fernández, who said that work is being done so that the body to which Argentina owes more than US $ 44,000 million understands the need to “continue allocating resources to the neediest sectors ”.

At the same time, he stressed that upon assuming his mandate, he found “a languid, unreserved, empty Central Bank with few freely available dollars” and that he sought to “privilege the use of those dollars in the purchase of inputs”, therefore that the savings in dollars were limited with measures such as the Country tax or the 35% advance on Earnings.

“The pandemic has disrupted the economy around the world. We also suffer from it and by the end of the year we will have a clearer picture to face it in 2021 ”, assured the President.

Aldo Abram: “If the credibility crisis is not reversed, we are going to a currency crisis worse than the one in 2002”

The economist director of the Fundación Libertad y Progreso Aldo Abram referred in a dialogue with EL LIBERAL to the complicated economic scenario that prevails in the country, exacerbated by the exchange controls that failed to curb the demand for foreign currency that during the past week led to record values ​​both in official and parallel dollars.

For the analyst, the main cause is the lack of credibility in the government and the measures it adopted in recent weeks.

The director of the Fundación Libertad y Progreso explained with respect to the exchange rate that “it is not the dollar that is rising, what is happening is that the value of the peso is being destroyed because if the Central Bank to finance the Government has been issuing a lot , but much more than what people want to have in pesos, that will make its value fall as it happens with the value of any other product, when whoever produces it makes more than what people want. He added that “if the BCRA also produces more, not only does demand fall but its value falls faster, that is what is happening to the Argentine peso.”

He pointed out that “if the dollar rises it is because the peso is depreciating, which is what is happening now basically and what it does is anticipate that there will be more inflation. The government has very few instruments to stop this. The first thing would clearly be to stop issuing, given that the demand for pesos is falling, then it should take pesos out of the economy ”. He stressed that this measure could be done “by selling assets, bonds from the last debt swap or placing debt through the Leliqs, which what it does is generate less credit and raise the interest rate, which the BCRA does not like very much.”

When asked if this situation could lead to a major crisis, he indicated that “unfortunately, yes, the exchange rate crisis can lead to an economic crisis. The problem we are having is that we have a crisis and a crisis is always one of credibility ”.

Asked about how it can be reversed, he pointed out that “if the credibility crisis is not reversed, this will end in a currency crisis worse than the one in 2002, that is the reality. We are going in that direction. But it is not that due to a currency crisis we are going to reach a very strong crisis, there is a credibility crisis that is generating a capital flight and that is because we see that this government like the previous one is not willing to solve the underlying problems of the a country that we precisely know is going to lead us to a crisis ”.

“There is no way to stop this with measures from the exchange market”

The analyst stressed that “the only thing the government can do to truly stop this, there is no way to do it with exchange market measures like those launched last week, they are useless, they are an analgesic, because as long as they are not resolved the underlying problems will continue to act the same ”.

However, he pointed out that “perhaps some of these measures will improve a sector a little, but who is going to invest in Argentina if the underlying problems are not resolved? it has to do with a State that has persevered for decades in overspending and that is why we are going for the ninth debt restructuring ”. He added that “if one looks at what the restructured debt bonds are priced in terms of rate, it is clear that those who buy Argentine bonds, in no more than 3 or 4 years, are going to restructure that new debt and that is because it continues spending more and the Government says that to the expense it is not necessary to lower it ”. He pointed out that “we are a country with 67 thousand regulations and week by week, we see distortions in the economy, so it cannot work, because it suffocates SMEs.”