The economy occupies a central place in the presidential campaign: it did so on the way to the internal, with the tax issue in a predominant place in proposals and clashes between the candidates, with the appearance of the exchange rate lag in the last stretch; and it does so now, with the dancing names of the possible and eventual Ministers of Economy of each political space and the issue of the inflation as the protagonist of the new stage.
In recent days, as the campaign for October takes shape less than three months before the elections, conversations around the inflation —with competitiveness always as a backdrop— are beginning to be put on the table as an essential topic on the economic agenda not only of the candidates, but of those who are already projected as eventual leaders of the Ministry of Economy and Finance (MEF).
One of them was the one already presented as the successor of Azucena Arbleche in case the National Party and Alvaro Delgado win the elections, Diego Labat. In dialogue with Radio Carve, the former president of Central Bank of Uruguay (BCU) He highlighted the achievements of his administration at the head of monetary policy in terms of inflation control – with the application of a target range and compliance for 14 consecutive months, and counting – despite the fact that, at the beginning, he was told it would be impossible.
In this sense, he pointed out one of the criticisms that has been constantly made, especially from the sectors agro-exporters: that the reduction in inflation, however good it may be, was achieved at the cost of the loss of competitiveness for agriculture due to the exchange rate mismatch. “The fall in the real exchange rate It is a concern, but it is not correct to point to monetary policy as the cause,” he said.
“Anybody in Uruguay seriously believe that if we carry the inflation “At 10% all competitiveness problems are solved?” Labat questioned and added that the deterioration of Uruguayan conditions in international markets “is not solved with inflation.” “What we have to finally understand is that the low inflation It is a good thing for the economy to function and does not necessarily end up affecting competitiveness,” he said.
The “crossroads” between Labat and Oddone
The economist Gabriel Oddone, who is being considered as a potential Minister of Economy in a presidency of Yamandú Orsi and the Broad Front, He also spoke about the topic of inflation, and while he acknowledged that the current level is an “achievement,” it “is not sustainable over time.”
For the former director of CPA Ferrere and current think tank Agora, The maintenance of the CPI within the target range was possible thanks to a set of circumstances that pushed prices downwards.
“One of the most important was the action of the monetary policy of the Central Bank, knowing how things happen in a country like Uruguay and not having had a sufficiently restrictive fiscal policy and at the same time a salary policy that was aligned with a presidential commitment to recover the salary level prior to the pandemic, generated a series of inconsistencies “which translates into an appreciation of the real exchange rate in the country,” Oddone criticized in relation to the exchange rate lag, also in conversation with Radio Carve.
Asked about these statements, Labat replied that “we have to stop thinking about the inflation as something that happens because we inherit it, because it comes to us from outside, and we have to think that inflation is a variable, that is under control.”
“What I hear in the audio is that there are a lot of things that happened to keep inflation there,” he continued, and although he acknowledged that there are “external variables that help or complicate the task of the Central Bank, inflation is no longer a random fact, but rather a fact that defines whether more or less effort will have to be made.”
Source: Ambito
