- The dramatic sector diagnosis
- The problem of government timing
Carlos Melconian flatly rejected the direct connection between the exchange rate and the sharp drop in demand that Argentinean small and medium-sized companies go through. The economist distanced himself from his diagnosis of Domingo Cavallo’s criticism of Javier Milei’s exchange rate system.
“They want to combine the demand for shoes with an expansion of the spread, and I reject that,” he said when asked about the former economy minister’s proposal to float the exchange rate. “Macroeconomic policy is one thing,” he added, justifying one clear distinction between structural problems and exchange variables.
Cavallo had pointed out this week that the government faces a “very simple problem” related to a “very low” real exchange rate that forces it to maintain a system in which “openness causes unnecessary harm.” His recommendation was to “freeze everything, let the exchange rate find equilibrium, and buy up large reserves in the middle to monetize the economy.”
However, Melconian presented a more complex vision: “It is incomplete. I am not talking about the exchange rate, nor about buying reserves, nor about releasing everything.” For the economist, this is the underlying problem First, define what is expected from economic policy in terms of the exchange rate and monetary regime.
“The exchange rate must be linked to reserves and debt measurement. “The financial thing has to be related to the remonetization of the economy,” he explained in an interview with Play Now. And he added: “Then the fact that the band is released, the band’s DJing, it’s late, it’s not late, that’s instrumentality and consequences.”
The dramatic sector diagnosis
The real problem, according to Melconian, is demand. And here he painted a devastating picture of the situation in which SMEs find themselves. “You meet people who tell you, “Hey, my worst November was during the pandemic” or “My worst November was 2001.” “I’ve now had my worst November,” say the boys,” he said after attending seminars with businessmen at ProPymes and Somos Pymes Córdoba.
“We don’t have to confuse supply with demand. Because when you gave me the example of ‘I’m going bankrupt because imports are coming’, that’s the question of supply. Then comes the second problem that imports cannot be sold either,” he said.
Surprisingly, according to the economist, Importing is not the main problem. “I have a lot of customers who compete with imports, who are in that decision when they give up and become an importer and so on. None of them have told me with exceptions, none of them have told me that imports bring them down. They are brought down by smuggling, that’s a different problem,” he explained.
“Vaca Muerta, mining and rural areas are very useful sectors for the macroeconomy, but their function is suddenly more focused on the macroeconomic currency crisis.”
The diagnosis points to two dimensions of the demand problem: a macro and a micro dimension. “The macro theme of demand is inevitably constantly growing. always grow, even in those sectors that you have to wait for to be buried”he explained, emphasizing the importance of credit as a “growing influence on demand.”
The micro dimension is purchasing power, “A complicated question” that measures “how much they gave you a raise versus how much things increased and what the relative price of the goods that this government received late was affected.”
The problem of government timing
In another interview with FM DeltaMelconian insisted that the government’s problem was timing. “While conceptually monetization, lending and workforce absorption will come eventually, it is a slow process,” he said.
In this sense, he warned about the sectors that the government expects to lead growth. “These are sectors that have lower spill potential,” he said, referring to Vaca Muerta, mining and rural areas.
And he continued: “One must assume that these are very useful sectors for the macroeconomy; a sector that generates foreign exchange, which is a perennial problem for Argentina, is a very welcome sector. But.” His function suddenly becomes more focused on the macroeconomic monetary catastrophe“.
“An urban area linked to industry, commerce and construction is not the same as a province with great potential for energy, gas or even Pampa Húmeda,” he compared. And it was haunting: “The spillover that reaches people is lower.”
Melconian clarified that this does not mean a rejection of these sectors. “What I am saying does not in any way justify that they are blackmailers who accept it. What we want to say is that it is very useful for the country,” he explained.
“We must not confuse this with the mass catastrophe, because that is not the reason why the mass catastrophe originated. So what we have to do is make people understand this and not make them the enemy of these sectors,” he concluded.
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