The former Minister of Economy, Domingo Cavallohe hardly questioned the government exchange scheme. On this occasion He warned that if the dollars from the International Monetary Fund (IMF) are used to intervene in the price of the currency, the disinflation process, the main battle knight of libertarian management.
Recently, the current minister, Luis Caputo, confirmed that the country requested US $20,000 million to the IMF in the framework of a new extended facilities agreement (EFF), something that must still be approved by the Board of Directors of the agency. However, it is still unclear how many of these funds will be freely availability and there were no details about the continuity or modification of exchange policy.
In this context, Cavallo, who was at some point listed by President Javier Milei as the best minister in history, warned that “Thinking about the use of external reserves achieved through international financial organizations to intervene in the exchange market and induce or maintain an exaggerated appreciation of the weight is counterproductive and can mean the failure of the disinflation process“
“The simple continuity of exchange management and the use of reserves that belong to the depositors of dollars in the banking system to intervene both in the official exchange market and in the free pseudo markets (CCL and MEP) does not lead to consolidating the disinflation climate,” said who knew how to be an official of the governments of Carlos Menem and Fernando de la Rúa through a note in their personal blog.
It is worth remembering that the use of reserves to intervene in the parallel markets of the dollar was an issue that they always criticized from the IMF. That is why In recent weeks the rumors that the agreement would contemplate a request for modification in the current artificial control strategy of the exchange rate.
Cavallo explained the differences regarding the convertibility of the 90s
Cavallo demanded that the Government explain more clearly what the transition to the single market scheme will be like currency competence. Although during its management in the Treasury there was also a remarkable appreciation of the exchange rate, differentiated the current strategy of the convertibility plan.
The economist said The ruling program is based on the empirical evidence that all successful stabilization plans included at least one initial period of fixed exchange ratealways accompanied by an order in fiscal and monetary accounts. Under that conception, the balance of external accounts will be achieved by the effect of the fiscal and monetary equilibrium, and for the opportunities of exports that emerge in several sectors, such as the miner and the energy.
Nevertheless, He clarified that during the convertibility “the exchange rate that was fixed was already a unique exchange rate, the mechanisms of exchange differentiation that existed (withholdings to exports and high and variable import tariffs) were eliminated from rennet at the very beginning of the stabilization plan, and there was complete freedom for capital mobility.”
“It was precisely this characteristic of the convertibility plan that allowed the fixation of the exchange rate, in addition to helping the change in expectations and breaking inflationary inertia, induced a strong entry of dollars to the formal economy, either as deposits in dollars in the financial system or as an exchange of dollars for pesos issued by the Central Bank,” he deepened.
Unlike that model, he explained, the current government’s plan “continues to require use of scarce reserves of the Central Bank and is based on the support of an exchange rate that is not unique or free.” Cavallo said that if the Executive Power will not be able to continue lowering inflation “if it is proclaimed that any exchange jump will launch a hyperinflationary process as they seem to believe in the economic team.”
Source: Ambito
