The BCRA “anchored” the exchange rate from the second half of 2021 where, unavoidably, the crawling peg was running behind inflation. This unsuccessful attempt to slow down the monthly rate of inflation was fully evident in recent months. Now, voices are emerging again warning about the exchange rate delay.
It is true that, according to any methodology usually used, the multilateral real exchange rate shows a “delay” since the beginning of 2021. That was being distorted, for and against, mainly due to the future of the Brazilian real. But how cheap is the dollar, as some warn? Beyond the traditional debate, the most advisable thing is not to lose perspective.
It cannot be denied that something has happened worldwide. Nothing less than a strong appreciation of the dollar, mainly from the normalization of the Fed’s monetary policy. Of course, high inflation, wage pressures and a tight labor market complicate the Fed’s ability to achieve a soft landing. . So the stock market adjusted to the reality of a more aggressive Fed and slower growth. Investors took refuge in the dollar, which according to the Dollar Index has appreciated almost 8% so far this year. For example, the yuan, which was trading at 6.30 at the end of last February, has risen to 6.7 units per dollar.
Of course it was coming, through a pandemic, falling from 7.2 in May 2020. The same thing happened with the euro and the yen. They all lost against the dollar, between 5% and 13%. Needless to say, all the emerging currencies, with their pluses and minuses, suffered from the strength of the dollar. In this regard, the manna from heaven that was the appreciation of the real, which from R$5.74 per dollar at the end of 2021 fell to R$4.6 at the beginning of last April, ran out after now jumping to R$5. Faced with this world evidence and the recent appreciation of the peso, there is nothing more to give up. It is like a “Double Nelson” key: it devalues below inflation and the dollar appreciates against all currencies. Of course, the BCRA stepped on the accelerator a little more.
According to data from Estudio Broda, in March the devaluation rate rose to 3.3% per month and to 3.9% in April (it came from 2.2% and 2.5% in the first two months). But in parallel, the monthly inflation rate ran the first two months to 3.9% and 4.7% and 6.7% in March and April promises the same. In other words, it was not enough, less to anchor expectations. But how bad is it? It is clear that the real exchange rate has lost competitiveness. And it is true that, for simplicity, economists point out that the real exchange rate is the inverse of the real wage. So if one goes up, the other goes down and vice versa. But aside from the goals set with the IMF, it seems that not only where it comes from but where it is is being left aside.
For years the economy has been dragging imbalances that are spasmodically hatching different aspects of the macro. It is argued that the dollar is cheap.
Let’s see. The parallel dollar (CCL) of the October 2020 peak, according to Macroview data, is today equivalent to almost $290 while that of Macri’s last months is almost $170. Given the question of whether the CCL below $200 is expensive, Macroview considers that “it is a dollar according to this unstable and uncertain macro.” In other words, it is typical of a context of instability like the current one and similar, for example, to the 1980s with Alfonsín and Menem. Because a parallel dollar of terminal crisis today would be equivalent to more than $350/$380.
Of course a $200 CCL with a terminal crisis would be cheap. Today it seems not to be that context. While the official dollar, today at $114, is not at all behind its historical average level. For example, late official dollars as with Kicillof (2015) or Sturzenegger (2017) would today be $82 and $88, respectively, and the Convertibility or Martínez de Hoz Tablita (1979/80) would be $76 and $65. But it happens that wages are buried in the subsoil.
What is the economy’s average dollar wage? Surely there is super-competitiveness there. There are no complaints from the UIA or from the exporters. Nor waves of Argentines traveling abroad. As much as they say that there are “thousands” of reserves for the World Cup. So, it’s not very cheap, least of all in terms of family income.
Source: Ambito
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