Economist Carlos Melconian weighed in on the debate between the government and the International Monetary Fund (IMF) over exchange rate and reserves strategy. “This plan cannot continue,” he concluded. While the executive branch is committed to strengthening international reserves, Melconian explained that the priority should be different: “The goal should be to pay for reserves, not to accumulate them.”
The controversy was revived when Economy Minister Luis Caputo defended his accumulation plan as key to the stability of the dollar. On the contrary, Melconian said in radio statements: “This plan cannot continue, the Treasury and the BCRA need to redefine how they move forward. Everyone says we need to buy reserves, what I’m saying is we need to buy dollars, not reserves.” He warned that the central bank’s assets were not enough given the current level of debt.
The economist advocated a change in strategy: instead of insisting on increasing reserves, which would be difficult to maintain without a “rain of capital and investment” from abroad, he advocated the purchase of dollars that would be used to pay off liabilities. “A purchase to pay interest while accumulating reserves is not going to happen,” he said.
Melconian concluded that the obsession with accumulating reserves could be counterproductive. According to his diagnosis, the focus should be on ensuring foreign payments and creating conditions of macroeconomic stability that reduce country risk.
Looking ahead to next year, the former Banco Nación president warned that inflation of 2% per month is an average that hides distortions. “Relative price changes are missing. While some go down, others go up,” he explained.
Finally, he linked the recovery in economic activity to credit and wages. “It won’t be anything immediate. It will depend almost entirely on credit consolidation and purchasing power improvement. It’s pure macroeconomics,” he said.
The economist also considered the government’s easing of the exchange rate for private individuals to be a mistake. “Imports from all of Argentina amount to $6 billion per month; in the same period, demand from private individuals was a similar amount. The drop in demand was very sharp,” he said.
IMF spokeswoman Julie Kozack said on Thursday about reserve accumulation in Argentina: “Monetary and exchange rate policies must support a more ambitious course of reserve accumulation in order to create sufficient reserves in Argentina.”
In response, Economy Minister Luis Caputo commented on the targets on Friday: “Let’s distinguish what an accumulation purchase is. This is the government that has bought by far the most. We have bought $30,000 million in these 20 months.” Referring to the difficulties that accumulated in the first two years of his term, Caputo justified that Argentina “is a country without credit. We had to pay off all the debts that we inherited. Remember: $40,000 million to importers, more to multilateral organizations, more to the markets.”
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