Inflation is the great theme of the Argentine economy of the last half century, at least. Also about the fixation on the dollar and the reason repeatedly emerges clearly: more than holding on to a foreign currency is finding a lifeline that keeps purchasing power afloat devastated by inflation.
The number. But in the world the fluctuation of the North American currency was changing depending on the economic cycles and the flows of commercial exchange between blocks. Right now the dollar is strong against the euro and the yen, after almost a decade in which its weakness influenced the commodity boom. In the Argentine case, most of our international trade does not play in the “dollar area” so being tied to its price could cause imbalances in our exchange.
During the turbulence of last July, the first alarm was the stampede of the “free” dollar that reached $340 ($470 today). And at that moment the idea resurfaced that the only solution to eternal instability would be an even tougher corset than convertibility: dollarization, plain and simple.
The shortage of dollars in the Central Bank’s reserves led to the panacea of the “soybean dollar”, a measure by which exporters of this product without a major impact on the family basket received a differential exchange rate. In reality, an accounting movement also to charge more withholdings on the highest value, but that made the stock market silos empty and to be able to have the photo, at the end of September, of the level of reserves committed to the IMF.
Once again, the reserve crisis took over the panorama, the stocks’ response drowned out the reactivation underway due to the rupture of a large part of the logistics chains of inputs and products. ANDhe plan “soybean dollar 2.0” came despite the fact that its original version was going to be the last. Well, the need to show a photo at the end of the month according to the commitment. The Economist Esteba DomecqPresident of Invecq, estimates that US$3,000 million will end up entering, of which US$1,000 million will end up being demanded by importers and the rest, yes, will swell the reserves. At the same time, the fiscal result
But the danger zone is where the money supply could be expanded if everything were poured into the market for the simple reason that there is a process of sharp drop in the demand for money. In Spanish: nobody wants pesos just like that and to accept them, the “price” must be higher and higher. That is why the interest rate that the placement of letters (Leliqs, for example) to absorb so much liquidity has to rise every month. In fact, it was only in this last quarter that inflation evened out or stood a point above it.
George Hilleconomist of IDESA, puts the flight of the weight in the center of the stage. “This rejection is what makes the monetary issue inflationary. In this framework, pretending that inflation goes down when the dollar-soybean is reissued –which increases the issuance– is very contradictory”, he explains. His calculation is that of the $14 trillion in money supply, only $4.5 trillion is in circulation (one third) and the rest is in the snowball of the Leliqs. .
The bet. The consultant and economist alfredo romanogo in the “Leliqs “have been the worst monetary policy creation of the last 50 years. Faced with absolutely undisciplined governments in fiscal and monetary matters, using the BCRA mechanism to finance quasi-fiscal deficits only deteriorated the financial credit system in our country, in addition to destroying our currency. No serious and consistent economic program can be implemented with a primary fiscal deficit”, sentence.
Romano is the director of the race of Business economy from the Austral University and author of the book “Dollarizing, a path to economic stabilitya” in which he proposes that, “in the face of our institutional anomie, the only way to generate a State policy in economic matters is to go towards a dollarization process”.
In his opinion, Argentina is a machine for producing dollars and in the face of a change of government, with a robust economic proposal, it will be able to dollarize taking as a reference the equilibrium exchange rate of our economy: financial dollars”.
Controversy. If there is a consensus among economists, it is that the search for fiscal balance is not something accessory. Maria Castiglionidirector of C&T Economic Advisors notice that The discussion on dollarization resurfaces, but it does not see it as an inevitable process. “People want to cover themselves by going to the dollar or consuming goods and services. but noOur neighbors solved it with stabilization plans, effective reforms and a Central Bank that takes care of ensuring the value of the currency. But if there is no fiscal solvency, none of this will succeed, ”he explains.
In this sense, it appreciates the effects of an eventual dollarization for stabilization since inflation would drop faster due to confidence in the currency, it would constitute an interesting anchor as a reference for the rest of the variables and it would make public accounts transparent. However, he points to the example of convertibility as something negative since, in that period, there was a fiscal imbalance financed by tax increases, and later by indebtedness. “After all, a competitive economy is needed to face a strong currency because otherwise you end up paying with less economic activity or the collapse of the system, as in 2001. With 40% structural poverty, I see the risk of a recession as complicated ”, underline. In conclusion, he suggests looking at dollarization as an alternative, but not as a shortcut to stop “doing your homework.” A discussion that for now travels civilized lanes, but when the “soybean dollars” and other monetary policy innovations run out, it will return to the stage, but it will do so in full chaos. Better to analyze it when the variables still seem controlled.
