Cristiano Rattazzi had projected a jump of more than 100% with the arrival of Milei to the presidency. For specialists, everything will depend on the monetary, fiscal and exchange rate scheme, but they support a sincerity of the exchange rate in the short term.
At the end of the 29th Conference of the Argentine Industrial Union (UIA), Cristiano Rattazzihistorical authority of the FIAT company in Argentina, put a number on the official exchange rate after the arrival of Javier Milei: “He dollar at $365 it’s stupid, It has to be worth about $800.”. In dialogue with Ambit, economists They predict a devaluation of that magnitude or perhaps less. The importance of competitiveness and reordering the price reference scheme.
After his statement, the Italian-Argentine businessman clarified and He said the dollar could also be worth $700.. What he is sure of is that the currency whose price depends exclusively on the BCRA “is useless.” Anyway, considered that the “honesty” of prices has already been done: “90% have already come clean.”
For Andrés Reschini, head of F2 Soluciones Financieras, from the perspective of the multilateral real exchange rate “it is likely that one dollar to 800 at the end of the year bring the RER to about 160, which It is a historically high level” therefore “it would encourage the income of foreign currency from exports and would be in the same level at which it remained for much of the 2000s”. At the same time, the official dollar at $700 “would remain at 140, which is not low but from 2002 to 2009 it remained higher.” For the finance expert, the current real exchange rate is the “most appreciated since the end of 2017” and with a level of negative net reserves of US$10,500, the BCRA situation “is extremely fragile.”
If the exchange rate correction is seen as inevitable, the question will then be when. “Sooner rather than later,” responds Santiago Manoukian, head of research at Ecolatina. On the other hand, he considers that the price of the dollar could be “a little below those levels” indicated by Rattazzi, although will depend “of the stabilization program that is applied, if it is credible, and is consistent” and fundamentally of “not returning with the idea of dollarizing”. On this last point, La Libertad Avanza sends confusing signals, since Luis Caputo as Minister of Economy and the departure of Emilio Ocampo from the BCRA suggest that dollarization is ruled out, although it is not clear if it is a temporary or permanent decision. Caputo’s own consulting firm Anker rejects dollarizing at any cost, but does not outright rule out this exchange rate regime as a method to lower inflation.
For now, for Manoukian, the correction of the exchange rate will be important to avoid “regenerating a scenario of excess demand for foreign currency, considering that no one is going to want to sell at the current dollar,” since that “would be inconsistent with the need to accumulate reserves international”, which is urgently presented in 2024. Thus, the movement of the North American currency would be a fact even before the disarmament of the stocks.
Finally, for Gabriel Caamaño, economist at the consulting firm Ledesma, The official exchange rate acquires a nominal value since exports move to one dollar at $600 and the dollar for imports adds financial costs.. “The officer is not the reference. If one wants to simplify, one will have to go to an honesty of the official exchange rate. The government itself has recognized this by carrying out the split or by blocking imports,” he says in dialogue with Ambito. Although he understands that the dollar should be above $600, Its value will depend on other factors such as the fiscal scheme, the monetary scheme and the exchange scheme.. “In that order,” Caamaño highlights. In any case, he considers that automatic unification “is practically ruled out”, but that a reduction in exchange controls would have to be implemented quickly.
At the same time, it is unavoidable to measure the impact on prices -which fly to double digits again- after a devaluation. However, for the economist, if both the exporter and the importer reference their prices in different quotes, the official “is no longer a reference”, and the transfer of a correction to inflation “would not be the same as if all prices were formed for the official currency.”
In turn, according to Caamaño, an exchange simplification would come hand in hand with the elimination of taxes that currently fall on the dollar. “If you eliminate the tax part, that will offset part of the impact of the devaluation,” he says. Finally, he agrees with Rattazi: “It is clear that there is a part of this honesty of the official exchange rate that is already transferred to prices,” he concludes.
Source: Ambito
