A VOLTA DAS DINES DE Brazilian beaches full of Argentines They refer to past decades and are explained by the economic conjuncture of the country. The Government has followed three essential pillars to contain a crisis that seems endless: fiscal balance, monetary discipline and inflation reduction – this last point, through exchange rate management, which has generated a momentarily valued weight in relation to coins of neighboring countries, such as Brazil.
Consultant and professor at the University of Buenos Aires, Martin Rapetti, explained the current situation in a joke in a post on the X network in early February: “Let me clarify: the real exchange rate is a relative price; When it is low (late) it is better to go to Brazil, Miami or Punta del Este [no Uruguai]or even for Rimini, with Odalisks! When it is high, go to Mendoza, Bariloche or Mar del Plata. ”
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In fact, the Multilateral Royal Exchange Rate Index of the Central Bank of Argentina (BCRA), which compares the local rate with that of its main trading partners, shows that weight is experimenting with its greater appreciation since the end of convertibility [a paridade cambial de 1 por 1 que vigorou entre 1992 e 2002]except for a brief period between August and November 2015.
Regarding Brazil, the devaluation of the real before the dollar accelerates this “artificial” appreciation of weight, cheapering the destinies of Argentines on vacation. In addition, the products Brazil offers to the world become more attractive than Argentina deeds. This can press weight, which is supported by a high level of restrictions (the famous “blind”) and add voltage to the currency difference.
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As soon as he assumed, Milei’s economic team, led by Minister Luis “Toto” caputo, practiced a devaluation of the currency, following the “Crawling Peg” scheme, with monthly adjustments of the official dollar around 2% – recently reduced For 1%, a rate less than monthly inflation.
This has allowed to partially contain inflationary expectations, but the strategy ended up resulting in an exchange rate that reflects neither internal prices nor global dollar trends.
In real terms, the Official Dollar accumulated an 183% increase in the last year, compared to an annualized inflation of 193%. For their part, the CCL and MEP parallel financial dollars, with only 29%, have experienced much lower increases in real terms. As a result, the Argentine weight remained overvalued, generating significant distortions in sectors such as tourism.
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In a recent article published on his blog, former Minister Domingo Cavallo said that “there is an exaggerated real weight appreciation that can be estimated at about 20%”, which “generates concern in the exporting agricultural sectors and other industrial sectors that compete with imports ”.
There are speculation that in a new devaluation of the coin is on its way, but Milei said in an interview, “Let’s not devalue at all.” Dissatisfied with Cavallo’s statements, he decided to dismiss his daughter, Sonia Cavallo, from the position of Argentine representative in the UN, without hiding that it was a retaliation for her father’s comments.
Pros and cons
Local experts point out that currency delay was a recurring tool in Argentine economic history to contain short -term inflation. However, their costs accumulated in the medium and long term, affecting the competitiveness of key sectors.
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They argue that while tax equilibrium and monetary stability policies have been important steps to normalize the economy, they may not compensate for the adverse effects of an artificially low dollar.
The escape of Argentine tourists out of the country because of the cheap dollar intensified from January, when the charge of tax parents on card purchases abroad fell from 60% to 30%, further encouraging travel.
And tourism is just the tip of the iceberg. In the current situation, high dollar prices in dollars discourage the placement of Argentine products in international markets, which can have unwanted consequences for federal collection. In addition, foreign direct investment sees little attractiveness due to uncertainties and lack of lighter rules.
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Elections come there
Another point to be thoughtful is that the Argentine government needs to maintain popular support in these months before parliamentary election and inflation control is essential in this search. This can guarantee an improvement in the party’s position Freedom advances in Congress and make the path of economic reformulation less thorny.
It is this political situation also that has delayed the goal of raising the currency barriers, the famous “blind” before the elections. Although it has technical arguments, such as still high inflation and low BCRA reserves, there is a clear fear that this release can generate high prices while the market is seeking the balance exchange.
Former Economy Minister Emmanuel Álvarez Agis recently recalled that in the previous periods of currency appreciation through which Argentina went through, it was the accumulation of reserves that determined sustainability.
In the 1990s, this was achieved through foreign direct investment (IED), debt and privatization; In the 2000s, through capital repatriation and commodity boom. Under the management of Mauricio Macri, he came through the attractiveness generated by Carry Trade strategies.
(With information from the newspapers, La Nación, Clarin, Page 12 and the Argentine Sites and Sites)
