Why the peso will be devalued before 2022

Roberto H. Cachanosky

Member of the Academic Council of Libertad y Progreso. Degree in Economics from Universidad Católica Argentina. He is an economic consultant and author of the books "Economía para todos" (Themes, 2002) and "El SindromeArgentino" (Ediciones B, 2006). He serves as a columnist in the newspaper La Nación. Previously, he worked the same task for the newspapers La Prensa (1985-1992), El Cronista Comercial (1992-2001) and La Nueva Provincia de Bahía Blanca (1992-1998). He's the host of the cable TV show "The Economic Report." Lecturer in Applied Economics of the Master of Economics and Administration of ESEADE, senior lecturer in Macroeconomic Theory of the Master of Economics and Administration of CEYCE. President of the Center for Economic and Institutional Studies. He was Economic Adviser to the Argentine Chamber of Commerce (1983-2002) and to the Argentine Chamber of Importers (1992-1993).

EL CRONISTAAlthough the Argentine Central Bank (BCRA) launched a series of measures to contain the loss of reserves, the pressure on alternative dollars is growing due to the demand for exchange rate hedging and country risk soaring to 1,900 basis points.

In this context, El Cronista spoke to Roberto Cachanosky, who calculates that there could be a devaluation before the end of the year.

We should remember that, on one hand, the BCRA prohibited paying for tickets and tourist packages abroad with credit cards installments. On the other hand, its cash position went from 4% to 0%, which pushes private entities to divest themselves of dollars to neutralize their balance sheets.

When the economist was asked whether an agreement with the IMF being rushed will calm the exchange rate, Cachanosky replied: “You can sign the agreement and have calm for a while, but if structural reforms are not made, the economy is going to hit the ground running. I think that the calm can’t last because there are no structural reasons for people to trust the peso and not flee towards the dollar ”.

Furthermore, he clarified that “If we talk about the official dollar, my calculations show that we’ll see a devaluation before the end of the year for a technical reason for the transfer of funds.”

THE TECHNICAL REASON

The professor explained that the Central Bank can finance the Treasury in two ways: Temporary advances and profit transfers.

Argentina has already received all the possible advances and used them. The Central Bank recovered them with the SDR but has just 47,000 million pesos left at the end of the year. Temporary advances are set by the Central Bank’s charter, which is a law that sets a limit. If the directors of the BCRA expand it beyond there, they would be violating the law and may have a legal problem ”.

Of the two ways in which the Central Bank transfers money to the Treasury, the one used for the highest amount is always transfer of profits. But where do these Central Bank profits come from?

“They come out of an increase in the official exchange rate, it is computed as a profit against the reserves or against the non-transferable bills in dollars registered by the BCRA that came from the Treasury. Then profit is transfered via issuance. To achieve this, it has to be computed within the balance sheet and for that to happen, before the end of the year they will have to devalue. When they devalue the peso, profits increase “, he concluded.

IS THE DOLLAR EXPENSIVE A 201 PESOS?

Faced with this question, the economist emphasized that expensive or cheap is a subjective matter. However, he believes that the answer lies in expectations.

“The dollar must have risen 20% compared to last year against an inflation of 52%, I don’t see it as expensive. I do see the expectations of the Argentine economy going forward according to what this government is, the little proposal that appears in economic terms, it is actually cheap. It is a problem of expectations: what can happen to Argentina. Considering what it can be, it’s cheap. But I emphasize, cheap or expensive is a subjective concept ”, he said.


		
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