The economist, praised several times by President Javier Milei, said that the Government should follow the IMF’s suggestions regarding the management of the dollar.
Former Minister of Economy, Sunday Cavallo, He predicted a loss of reserves and strong expectations of devaluation if the Government does not comply with the suggestions of the International Monetary Fund (IMF) and decides to maintain the exchange rate policy and the currency controls. to the dollar. At the moment there are no signs that the current economic team is acting in that direction.
Through a note published on his personal blog, the economist praised on several occasions by the president Javier Milei, recommended that the Government “pay attention to the suggestion implicit in the latest report of the IMF staff,” in regards to the elimination of the dollar blend (scheme by which today 20% of exports are settled at the CCL) and a 10% adjustment in the official exchange rate.
For the international credit organization, and for Cavallo, the latter should be accompanied by the 10 percentage point reduction in the PAIS tax to limit the effect of the rise in the price of the dollar on the cost of imports. This measure is the only one of the recommended package that the Executive Branch will take for the moment.
In parallel, the economic reference during the 90’s maintained that the rise of rates at positive levels in real terms and the Replacing the CCL dollar market with a complete liberalization of the currency controls will help reduce the gaplargely because this would generate incentives for the entry of foreign currency from money laundering, tourism and the services that Argentines currently provide abroad.
“It is possible that, with these measures, the expectation of a strong devaluation could be transformed into that of a limited increase in the crawl rate, in no way dangerous if a complete unification of the exchange market can be achieved in a few months without a devaluation jump,” he projected.
The 3 reasons why, according to Cavallo, reserves would fall and fear of the dollar would increase if the restrictions on foreign trade are not lifted
1- First of all, Cavallo warns that The BCRA will have an uphill battle to translate the trade surplus into a larger amount of reserves if the “blend” is not endedThis would occur because, starting in July, the monetary authority will no longer be able to continue postponing import payments as it did in the first half of the year.
2- Debt payments in the coming months and years are significantwhich is why the Government will urgently need a source of reserve accumulation, something that Cavallo does not foresee if the current exchange rate policy is maintained, with the “blend” and a “crawling peg” of 2% per month.
This could be remedied with new disbursements from international organizations, according to one of those responsible for state reform during the government of Carlos Menem.
3- The exchange rate restriction prevents a positive balance in the capital account of the balance of payments.
Source: Ambito
