Amid the debate over the government’s ability to rebuild central bank reserves after the electoral shock, Martin Redrado called for an announcementHe specified a stable monetary system and exchange rate, and stated that Argentina was “ready for a dual monetary system.”
The economist, Vice President of Fundación Capital, pointed out that the process of slowing inflation in emerging countries is long-term. “The process of deceleration of inflation is ongoing, persistent and arduous.” He said. As he explained, the impact of monetary policy is not immediate: “It takes 24 months from the moment the decision is made until it has an impact on inflation,” he said during a talk at IERAL.
Redrado analyzed inflation targeting regimes and transitions in different countries. “The world has already solved the inflation problem.”He pointed out. When reviewing experiences such as Mexico, Uruguay, South Africa and PeruHe pointed out that countries have advanced in stages. “There are intermediate steps so we can do this,” he added.
One of the central points of his presentation was the importance of accumulating reserves. “The more reserves there are, the less risk there is for the country.” He said. He warned against that The financial means for adding foreign currency are unstable: “Capital comes in and out very quickly.”. Regarding the local situation, he said: “We start with the Central Bank with 11 thousand million dollars in net negative reserves.”
He also reviewed the recent exchange rate policy changes. «Exchange rate policy advances from bridge to bridge» detained. He pointed to money laundering, IMF support and swaps with the United States as temporary tools. When referring to the monetary system, he noted: “Argentina has few official dollars and many unofficial dollars.” He added that one of the challenges is turning these assets into part of the financial system. “A dollar debit card has been created, but it is little used,” he said.
Redrado stressed the need for the independence of the central bank. “The central bank should not finance the public sector”He said, and stressed that this requires legal reform: “It is important not to rely on people, but rather to create institutions.”
Regarding monetary policy, he explained that countries with low credit to the private sector face difficulties. “Interest rate is a weak channel” He said. “An interest rate adjustment is by nature a weak nominal anchor,” Guillermo Calvo was quoted as saying. In this sense, he suggested that Argentina use a “nominal anchor such as a monetary amount” in the transition.
The economist also stressed the need to move towards an unrestricted exchange market. “We must create a path that points to an exit from restrictions,” he said, proposing as a goalOr “one type of exchange that allows the private sector to make decisions.”
Finally, Redrado emphasized that the country is in a position to adopt a dual system of monetary circulation. “We believe that Argentina is ready for a dual monetary system where the peso and the dollar can trade freely,” he said. In this sense, looking at countries such as Peru and Uruguay as examples where this step has already been taken, the economist noted that the model for Argentina would be a “reinforced Peru”.