“Argentina is not ready to go to a free-floating regime”Federico Foriasi, Director of the Central Bank (BCRA), said in a strong defense of the swap program that has been in place since mid-April. The official stressed that the economic plan showed its “flexibility” in these months that witnessed fluctuations, and stressed that once the electoral uncertainty was overcome, The phase of accumulation of international reserves will begin.
“With the macro economy in order, as a result of what has been accomplished and the recovery in demand for funds that we will have, We will create spaces so we can buy dollars. This is the result of a benign process, because the macroeconomic spaces were created to be able to purchase dollars within the framework of a recovery in demand for money, without pressure on inflation or the exchange rate within the floating system between segments, and without the need for sterilization. Additionally, it is independent of the dollar payment of maturities that we have next year“, He said.
Regarding this last point, the official explained that strengthening the central bank’s balance sheet would be independent of the millions of dollars that Argentina would have to spend to pay various multilateral credit institutions and investors. Because the country has the support of the United States Switch With China and reducing country risks that would allow “exploration” tools. To carry out repurchase or refinancing operations. He stressed, “This strategy will allow us to meet the maturity dates in 2026.”
At the end of October, Vladimir Verning, Vice President of the BCRA, informed the market that the entity planned to buy reserves to re-monetize the economy.
Furiasi was responsible for the closing of the event organized by the Argentine Institute of Financial Executives (IAEF), which was held on Thursday at the Yacht Club in Puerto Madero. With an audience consisting of economists, financial managers and stockbrokers, One of the first questions asked by the public was whether the zonal flotation system would be maintained.
“The scope works if it is well calibrated. What this program showed is that in the midst of the political noise it was working very well, and after this uncertainty, the dollar began to move away from the ceiling of the range. Why are bands so well calibrated? Because we have this dollar at $1,400. This implies a more competitive real exchange rate compared to what it was when Macri left the shares ($1,275 in real terms) or what it was during convertibility ($980 on average). With much better macroeconomic fundamentals.”
There are four reasons why we are “unprepared” for a free-floating dollar system: According to the official. It was mentioned in the first place Fluctuation of demand for moneyWhich was “proven in these months.” Secondly, emphasize political fluctuations, Each election is split between one party that “wants surplus and macroeconomic order” and another that “wants a return to spending and emissions.”
Thirdly, Furias mentioned it The volume of the exchange market in Argentina is between 200 and 400 million US dollars per day. Therefore it is “very small”. This means that with little demand, fluctuations can be generated that are “inconsistent” with the objectives of economic and exchange rate policy.
Finally, he explained that unlike the United States, where investors in crises buy government bonds to support their savings, The haven in Argentina is the dollar. He concluded, “This generates a mechanism that enters a vicious circle: the rise of the dollar generates more uncertainty, economic instability, and a slowdown in the economic cycle.”
The BCRA Director explained that economic policy is moving in The “trilemma” between reducing inflation, accumulating reserves, and promoting growth. According to Furiasi, after the launch of the shares in April, the “absolute priority” was to reduce inflation and break the monthly minimum of 2% in the middle of the year, which is why “the central bank did not go out and buy dollars within the range.”
We have succeeded in decoupling the process of reducing inflation from the rise of the dollar He stated that the increased risks faced by the country, precisely because there was a financial system. This Wednesday, inflation in October was known to be 2.3% per month compared to 2.1% in September.
Another focus of audience questions was the development interest rates would bring. In this regard, Furiasi indicated that it is “internal” and that the market determines it, but he stressed that, Once the political noise dissipated, it “collapsed.”
“What is coming is so much more. With more political support, and more social support, this decline in interest rates would generate more credit recovery. There may be more credit to families and businesses because there is an orderly macro system, and there are no longer liabilities paid at the central bank. “What will come is lower interest rates that will reinvigorate credit.” project.
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