While the IMF says that the Government is going to accelerate the devaluation and lift controls, Luis Caputo himself came out to deny any change
Dollar, dollar blend, reserves, inflation and devaluation. Do we believe the IMF or Minister Luis Toto Caputo? It is a debate of the last few hours and, spoiler provided, so far there is no resolution. It is the word of one against the other, but at the very least, there are tensions – exchange rates – that are likely to begin to emerge.
While the Argentine debt has lost level, the exchange rate and the country risk sets a floor that is too high to think about funding in the international debt market, free stone for a strong inconsistency that grows! To this we must add an impressive record: net reserves are -US$1.4 billion (negative), with a dynamic that has worsened in recent weeksnot only because the balance of the BCRA in the midst of harvest settlement does not reach the netting of foreign currency, but also because the delay in settlements and payment of imports (the normalization after the “quota plan”) has inhibited any improvement in this aspect. .
Now, for the end, the beginning. If the IMF makes recommendations, but the Government takes another path, does that imply that the US$15 billion that Minister Luis Caputo expects in “fresh money” will not arrive? If that is the only letter that President Milei is waiting for to reset the economic plan…
Choose your own adventure: Goergieva versus Luis Caputo, thousand version
The most important: While the economic team yesterday came out to rule out a change in the export dollar scheme, the IMF published a day before that the Government committed to ending the blend dollar at the end of June. “Following initial measures to undo foreign exchange restrictions and controls, the authorities remain committed to undoing all capital controls and foreign exchange restrictions, starting with the most distortive measures, including the elimination of the 80:20 preferential export scheme and eliminating the tax COUNTRY before the end of 2024,” said the technical team of the Monetary Fund.
It must be remembered that it was his own Luis Toto Caputo who in recent days had indicated that there would be no devaluation, that the scheme of 2% monthly devaluation of the official exchange rate would not be touched and that the exporting dollar would continue in force. Even in the last hours, it was the Secretary of Finance Pablo Quirno who posted, on his X account, Minister Caputo’s message from recent days where he ruled out changes.
Shuffle and give again: devaluation underway
What does the IMF say about the 2% monthly devaluation? “Although the fixed crawl rate (2% monthly) has helped anchor inflation after the great devaluation, authorities will adjust exchange rate policy over time to move more flexibly to better reflect the fundamentals and safeguard a greater improvement in reserve coverage,” said the agency’s technicians.
The sustainability of the surplus under this recipe is also called into question. The staff reported He pointed out again against the PAIS tax and, depending on the organization, It was Luis Caputo himself who promised to reverse the 17.5% rate which is valid today. The IMF says that the Government will cancel it this year. However, there is a problem: according to the Fund, of the 2.9% of GDP fiscal adjustment accumulated in the first quarter, 1.1 points are explained by this tax.
Like all setbacks, that of Kristalina Goergieva versus Luis Toto Caputo is not new. In the story “The Duel” by Joseph Conrad where the confrontation between two officers of Napoleon’s army is repeated in a manner as stubborn as it is mysterious and continues over time until it acquires almost legendary dimensions, the head of the IMF and the economist are once again confronted in their policies. In the middle, habemus to the Argentines… well? and it is clear that the prequel to this confrontation did not end well.
Source: Ambito
