The economist and consultant Ricardo Arriazu He is part of the small group of references to whom the markets usually listen carefully. Although you may sound optimistic in your talks, in reality, you have to stop and tell your audiences who are quite pessimistic about Argentina.
A great defender of Convertibility in the 90s, he remembers that in the 70s, when he was just over 20 years old, he was part of the group of “floats”, but then he realized that Argentina is not a common country, that it is “bimonetary” and that therefore the stabilization plans cannot be those that are applied everywhere.
What he does affirm with complete certainty is that Argentina’s solution does not involve a devaluation. That is why he recommends continuing with the same current policy and beating the market to beat the fight against the peso.
“There is no possibility of exchanging a peso for a dollar, because that is not there. But if it is not dollarized, Argentina’s only alternative is to win the fight. If the fight is not won, bye,” he explained.
For this scenario to be feasible, according to Arriazu, it requires in part that the Government obtain a result in the primary elections that allows it to secure a third of some of the Chambers to be able to shield vetoes or avoid a political trial. “If he doesn’t get it, Milei probably won’t last. It would be a ‘lame duck’”he stated when referring to the expression in English (“lame duck”) that is generally used for the last months of government of presidents who are already left without the possibility of re-election.
The analyst outlined a possible scenario until the elections, pointing out that Luis Caputo’s team is going to defend the exchange rate: “I have no doubt that they are going to do everything possible to ensure that the exchange rate does not go away.”he stated.
The issue is, then, what can happen after the elections. And there he considers that one option is that “the economy continues exactly as it is today” (and he clarifies that this is the alternative that he recommends), or that “they want to make a policy change.” It could be said at this point that this second option is the one encouraged by the government of Donald Trump and the IMF, which consists of devaluing.
Cornered, Caputo would have no choice but to “push”
So if the current exchange rate system wanted to be maintained, Caputo would have no choice but to take the fight against the market to the end. And for this the economist made a calculation about how much the run against the peso could be. “Look at the number over there on the right,” he told the businessmen and managers, pointing to a graph. “That is the maximum run amount: these are supposed to be US$24,000 million and they have US$27,000 million, clearly they can win it if they want to win,” he stated.
The numbers were estimated as a proportion of GDP at historical lows of items such as deposits in banks, and currency. In the first case it would be 30% on demand, 10% in term and 10% in currency, among others. The firepower would be our own dollars plus liquid reserves.
The need for structural reforms
But at the end of it all, Arriazu returns to Argentina’s dilemma in its recent history. He affirms that in a second stage of government Javier Milei would have to promote the reform agenda such as tax, labor and pension reforms that allows Argentina to gain competitiveness and avoid falling into devaluation.
The professional said that ““We are in the middle of a fight, but we are so stupid at reasoning that I have no confidence that we are going to change.”
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
