Now it’s official: the government admits that the Argentine peso will be increasingly stronger in the coming months – in other words, the dollar is more “underdeveloped” – but He considers it a positive symptom Because the result is that the stability plan will go well.
Monetary plan ideology Federico ForiasiHe publicly praised the research work conducted by three Argentine economists, which had just been published by the prestigious Oxford University Development Studies Journal, linked to the famous English university. After analyzing 46 stabilization programs in 13 countries in Latin America, he concluded that the recurring fact in successful plans to reduce inflation is the high exchange rate and current account deficit.
“in the corner”Furiase commented regarding the work he signed Gabriel Palazzo, Martin Rapetti, and Joaquin Waldmanwho searched for Balance counseling.
But, as always happens, not everyone interprets texts in the same way. While Furiase mentioned that function Like confirmation The Argentine economy is on the right track, as the authors of the paper themselves confirm It sparked their disagreements With some decisions taken by the team led by the Minister Toto Kabuto.
Among the points that have been criticized are, above all, Slow accumulation of reservesThis contradicts the latest definitions of Caputo, who warned that there will only be dollar purchases for the public sector to the extent that he considers there is a real increase in demand for pesos by the public.
“It is true that stabilization plans tend to overvalue the currency and cause a current account deficit. However, it is also true that this fact is precisely the ‘Achilles heel’ of the plans, which is why overvaluation is worrying.”The economist Palazzo wrote, after thanking Foriaci for his praise, but also warning that the conclusions of the research work did not entail congruence with the official view.
Reserves or low inflation: a clash of priorities
A few days before the Argentine economists’ work was published, Furiasi again relied on the live broadcast program “Las Tres Anclas”, which They are wrong Those who accuse the government of being Incurred disbursement delay.
The fact that there was a trade surplus, as well as that exports were at record volumes, was evidence that “the ranges were well calibrated,” Furiasi said.
What official Avoid mentioning it The trade balance in October was exceptional, because the impact of the “tax break” was still being felt for soybean producers, resulting in an extraordinary increase in foreign exchange income from agriculture. In the coming months, economists believe that exports will tend to decline, while imports will remain above $7 billion per month – a quarter of which will go to cars and final consumer goods that compete with Argentine industry.
Moreover, Furiasi also did not mention the tendency – Exacerbation of the current account deficit – Where, in addition to exports and imports, services such as tourism are counted, which means a strong inflow of foreign currency abroad.
This point is precisely what critical economists are demanding of the government. According to Palazzo, this is what historical evidence shows Kabuto’s plan is in shaky condition Due to lack of reserves in BCRA. He believes that at this moment, the government should show that the plan is sustainable instead of obsessing over reducing inflation to the region of 1% per month.
Specific risks mentioned by the author of the book “paper” What economists are talking about today is… I “sudden stop” in capital flow From outside. If that happened, Argentina would run a current account deficit, but without the possibility of offsetting that red flag with a capital account surplus.
“The lower the level of international reserves, the less room the central bank has to defend an exchange rate ceiling The decline in inflation is likely to end suddenly “With the balance of payments crisis,” Palazzo adds.
The risk of getting emotional about debt
Many economists have joined that discussion, generally to refute Caputo and Foriaz. SOr the situation, with a comparison between the levels of reserves held by central banks in the region. So a chart prepared by the consulting firm 1816 shows that while Uruguay has total reserves of 21.8% of its GDP and Brazil 15.8%, the Brazilian Reserve Bank collects barely 0.6%.
Such as influential analysts Miguel Broda They warned of the danger of maintaining a “low exchange rate” and opening the economy at the same time. It’s a warning in line with Techint’s CEO’s complaint, paolo rocca, Which at the recent annual conference of Argentine Industrial Federation She expressed her concern at the level of imports of home appliances that replace locally manufactured appliances. Rocca accused Javier Miley Being one of the few countries that is at odds with a world where governments do not hesitate to intervene in the economy to protect strategic sectors.
For her part, Javier Timmermana Wall Street-based firm that advises investors, warned of the risk that the government would become eager to issue debt to roll over maturities: “The problem is that for a country like Argentina the market can open and close in the face of any external event.”
For example, he stated that the country could suddenly run out of credit if the Federal Reserve tightens interest rate policy, or if Republicans win the US elections next year. Donald Trump They lost control of Congress.
A banking executive who also participated in the discussion warned that the Govt Leads to confusionBecause what the economy shows is not the appreciation of the peso As a result of investments But the causal order is the opposite: the plan It is based on an exchange rate anchor To contain inflation. In addition, there are warnings that the current account deficit may worsen faster than expected – it is officially expected to be less than 2% next year.
Those who defend Caputo
The criticism fell like a spray of cold water on the economic team, at a time of euphoria in the markets, which allowed the entry of about $4 billion from debt issuance to private companies after the legislative elections.
But the truth is that the official thesis “Internal reserve accumulation” It also has its defenders. Among economists who agree with the official line, there is another controversial argument: The best times to buy reserves are not times of current account surplus – that is, high exports, low imports, and little outbound tourism – but, on the contrary, times of deficit.
At first glance, this may seem a counter-intuitive argument: How can a central bank buy reserves in an economy that not only lacks a foreign currency surplus, but also spends more dollars than it brings in?
The response given by economists e.g Ricardo Arriazo, Fernando Marengo, and Eduardo Levi Yayati It is that in an economy where there is trust, capital enters through the financial channel. As demand for the local currency grows at the same time, there is no inflationary risk.
“The case of Brazil is the best example: it accumulated nearly US$300 billion between 2003 and 2011 while running an external deficit. The reserves came because of capital, confidence and investment, not because of a high exchange rate.”Marengo says.
Also with the example of the neighboring country, Levi Yayati says: “Brazil (and most emerging countries) He buys dollar When capital enters And sell them when they exit, which mitigates the impact of short financial cycles. This is why reserves rise when the real currency rises in value (less than the floating value). This happened in Argentina in 2003-2007 and in 2016-2017.”