According to the government the “political shock of expectations” which led to financial stress before the elections It was not due to “factors attributable to the economic regime”. The The rise in the exchange rate, the rise (and volatility) in interest rates and the fall in reserveswhat led to this financial support from the US Treasury Department, was because of it a “100% political” issue“, which was exceeded after the election results.
It was the financial version of “Everything is going according to plan” (TMAP, its acronym), this time from the Vice President of the Central Bank (BCRA), Vladimir Werningin a presentation to investors ratified the economic and monetary direction of the companyhighlighted the progress Structural reforms that “contribute to macroeconomic balance” And ratified the continuity of the dollar floating system.
“Financial normalization shows that there has been a shock to political expectations that didn’t happen (and there were no factors attributable to the economic regime)“Werning insisted days ago at a conference he gave at the LarrainVial International Investors Seminar. With this in mind described that the exchange rates implied in the futures market fell between September and Decemberand are currently in the flotation zone until at least April 2026. Werning spoke of an “exchange orientation”.” And confirmed the continuity of the exchange rate system, with the ceiling adjusted daily by 1% monthly.
Over there, attributed the causes of the financial volatility context to “politics.” of the last few months, with the credit cut due to the rise in interest rates and the shortage of money or the increase in country risk.
On this last point: Werning declined criticism or comments which many economists usually address in public debate the amount of BCRA reserves. “Country risk normalized after the election with no change in reserve purchase policysaid Werning.
Accompanies his message a graph showing the increase in the indicator since the ruling party’s defeat in the elections in Buenos Aires and the fall following the government’s victory in the national parliamentary elections. However, this description says so No mention of financial support from the US Treasury, the sale of dollars (purchase of pesos) by the Donald Trump administration Wave Partial swap activation which has allowed these weeks to keep the dollar within the floating zone.
Also rejected the criticism the BCRA received in July for its decision to abolish the Lefi (Liquidity Tax Letters).which sparked debate among analysts at the time the impact of this movement on interest rates and the peso market. According to Werning, the increase in interest rates in the second half of the year can be attributed to this a “political” issue and “were normalized after the election without any changes to the currency/exchange system.”
In any case, in the presentation he described the BCRA’s response to the scenario of political uncertainty and acknowledged that the company had a “monetary reaction” that “given the decline in money demand” implied “Severely restrict liquidity.” Among other mechanisms referred to the change in the regulation of minimum reserve requirements (increase in the level and changes in the method of measurement)which impacted banks and slowed the growth of lending to the private sector. “Monetary policy had to be restrictive because the demand for money fell“, summarized Werning.
In this vein, he also described the portfolio dollarization process that took place in the months before the election, calling this process “unprecedented.” “The $35,000 million decline in money demand due to dollarization represents more than 50% of M2 (Monetary aggregate that includes money in circulation held by the public and demand deposits of the public and non-financial private sectors)”.
According to Werning, the government’s election victory opened up a scenario of ““Automatic normalization after the election” These included various financial variables: lower interest rate, lower country risk and lower demand for dollars in the market. According to the economist After the election, there was an $8.4 billion drop in coverage demandAnd Retailer demand fell “from a high of $4.6 billion per month to about $200 million.”
About The Author
