After 100 days of Government, Javier Milei In the financial and fiscal sector, it has perhaps the best results to offer to a society that has been hit by inflation and continues to wait for relief in its pockets.
Until now, the cucardas that the libertarian can hang himself in the course of the “honeymoon” that is coming to an end are all regarding the macroeconomic and financial orderingsomething that the average citizen does not yet feel in his pocket.
An official dollar that, after the devaluation that made its price 118% more expensive, remained at a crawling peg 2% monthly, and some free dollars that reduced the gap to 20% in the case of MEP and Blue and 25% for the CCL. In these 100 days, free dollars aligned devaluation expectations in line with the government’s monetary policy and in fact some quotes rose at a slower rate than the official rate.
Facundo Herrera, Research Analyst at Grupo IEB said: “Despite the devaluation that took the exchange rate from $360 to $800 and the accumulation of 70% inflation in the first three months of management, the CCL remains at similar values to those of mid-December. The current financial exchange rate represents a minimum since the PASO of 2019 with a gap barely greater than 20%, which a priori would lead one to think that the conditions are in place for the release of the stocks with minimal impact devaluation”.
Making a quick evaluation, economist Gustavo Ber indicated that there was a marked reduction in the “gap”, since the immediate implementation of the fiscal balance and the monetary squeeze awakens confidence regarding slowing down inflation and being able to get out of the trap in the future.”
In any case, completes Facundo Herrera from IEB, there are still some obstacles to abandoning exchange controls. Firstly, there is an important restricted demand due to the maintenance of the MULC-CCL cross restrictions (among many other regulations applied by the previous management in order to contain financial dollars), while supply continues to be fed with 20% of liquidations of exporters.
The first step towards exchange rate unification should come from the gradual release of restrictions, walking safely and avoiding an immediate total release that would trigger quotes.
On the horizon, it also places another obstacle that comes from the collection side, since the release of the stocks would imply the elimination of the COUNTRY taxan important source of income for the public sector amid the drop in the level of activity: in February it represented 8% of total tax collection.
Given the objective of fiscal balance, a hasty exit from the stocks without a recovery in collection could put greater pressure on said goal and push for a greater adjustment in spending.
Herrera concluded that it would seem that the Government “prefers to walk slowly but surely and not make mistakes that could lead to overheating on the exchange front.”
“We are going to remove the stocks when we are sure that the conditions are in place,” said the minister. Luis Caputo at the Amcham Summit.
“However, if the objective is the elimination of the stocks, we should observe an acceleration in the release of restrictions, with the recovery or compensation of what was lost in collection remaining an unknown,” Herrera continued.
The future seems to be tied mainly to what happens politically, not toppling the financial engineering of “Toto” Caputo. The great uncertainty that always hovered over the libertarian Government: will it be able to obtain the political agreements necessary for the changes it wants to carry out?
In this regard, Gustavo Ber believes that “it will be crucial that, despite the political tug-of-war, it is possible to continue with the economic ‘roadmap’ in order to prolong expectations, in the midst of a harsh period of stagflation that requires social tolerance and given this, we can see better prospects for the future.
Source: Ambito
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