2023-12-15 03:46:00
After the implementation of a 118% exchange rate jump by the government of Javier Mileyuncertainty grows around a possible delay of the official dollartoday at $800, for inflationary flashes that are expected for the coming months and the goal of microdevaluations of 2% monthly that he announced Luis Caputo.
The package of economic measures announced by the Minister of Economy included, among nine other initiatives, a sharp devaluation to shorten the exchange gappromote exports, rebuild the Central Bank reserves and reverse the trade deficit.
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The truth is that both the Treasury Palace and the private consulting firms project inflation above 20% and even higher for the coming months due to the pass through -transfer to prices- which implied the movement of the wholesale dollar, the increase in the cost of imports and the liberalization of prices.
Although the exchange rate is at a level similar to that of the exit of Convertibility in 2002when it went from $1 to $4, some specialists see that the inflationary flare could liquefy the deep adjustment of the greenback that Caputo applied.
Inflation could liquefy the devaluation: the precedent
In this sense, the head of Research at Romano Group, Salvador Vitelliestimated that “with the inflation projected for the December-February quarter, if the crawling peg around 2% monthly “It would be reached at the end of February with a real exchange rate of $826”.
From the perspective of the economic analyst, with inflationary dynamics “so above the pace of the exchange rate, a strong exchange rate appreciation seems inevitable“in the short/medium term future.
In dialogue with PERFIL, Vitelli warned that in the event of a significant exchange rate delay, it conditions the possibility of devaluing again since it can “spiral inflation further especially taking into account that the measures adopted are orthodox in nature without too much presence of heterodoxy to also stop indexation“.
The immediate antecedent of prices “eating” the devaluation effects dates back to August 2023. The Monday after the PASO, the then Minister of Economy and presidential candidate Sergio Massa validated a 22% rise in the official dollar.
The accommodation of the variable had a direct impact on the cost of living: rose from 6.3% in July to 12.4% in August. In September, INDEC recorded an increase in 12,7%the highest since 1991, and the real exchange rate fell to the level prior to the PASO but with a greater nominality.
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Consulted by this means, the associate director of EcoGo, Sebastian Menescaldiconsidered “difficult“that a exchange delay in the coming months given the magnitude of the jump that occurred: from $363 to $800 in a single day.
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For Menescaldi, the appreciation of the dollar is tied to “the reliability of the program and what portion is transferred to prices“At the same time, it added wage disputes and bids for income and the behavior of economic activity as determining factors.
Following this line of argument, the consultant stated that the sharp contraction of the economy that Caputo and Milei predicted as a consequence of the “Chainsaw plan” sets a limit on price increases. “You will probably have a higher initial increase and then it will have to be reduced to the extent that it is not possible to sell,” she said, referring to the sales of companies in all areas.
The director of Economics of the Fundar Foundation agreed, Guido Zackpointing out that the effectiveness of the measures is tied to “the magnitude of the transfer to prices of both the devaluation and the removal of rate subsidies and how long this transfer lasts“.
“If the transfer is relatively limited and dissipates quickly over time, then the exchange rate would not be appreciated and, therefore, the delay would not occur. If the transfer is intense in both magnitude and duration, then effectively the exchange rate may fall behind again. We don’t know that now but it is a very strong risk,” Zack said.
In the event that the second scenario occurs, the economist predicted that “it is likely that all the problems we had until now will continue to exist but with a greater nominal value.” That is, with a highest dollar in nominal terms but not if it is evaluated against inflation.
For his part, the head of Research at Ecolatina, Santiago Manoukianhighlighted that the exchange rate increase implemented by La Libertad Avanza “It is designed precisely to overreact knowing that the inflation that comes after it is going to be very high and the exchange rate is going to appreciate.”
“As in any stabilization program, The initial correction of the exchange rate takes into account that it will appreciate later and not that it will remain at the same level. That is within the plans. We do not believe that they maintain the 2% of crawling every month. It is probably a little higher to limit that delay that is inevitably going to occur,” the economist clarified.
In Manoukian’s opinion, the Government should aim to coordinate inflation expectations downwards after the relative price corrections phase concludes through the fiscal anchor, with cuts in public spending and reduction of the deficit, and monetary, with the end of the issuance and clean up the remunerated liabilities -Leliq and passes- of the Central Bank.
The Government committed to the Liaison Table to review withholdings for exports from regional economies
Start of the Caputo plan: the gap collapsed and the BCRA added reserves
One of the purposes of the depreciation of the peso was to reduce the inherited exchange gap of 150% between the official exchange rate and the financial ones. In the first two days, the 118% devaluation achieved, for the moment, its mission: the difference between the prices was shortened to 23.7% after the blue dollar closes at $990.
At the same time, the highest value of the North American currency allowed the BCRA to buy USD 520 million in the Single and Free Exchange Market (MULC) in the last two dayspositioning the gross reserves above the USD 21 billion.
So far in 2023, The monetary authority sacrificed more than USD 23,000 million and the management of the Frente de Todos left the net reserves -discounting the Central Bank’s liabilities- in a negative terrain that oscillates between -USD 11,000 million and -USD 12,000 million.
MFN / ED
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