In an extensive article in his personal blog, he supported the purchase of BCRA reservations despite the fact that the exchange rate does not touch the band’s floor.
The former Minister of Economy Domingo Cavallo He affirmed that the Purchase of international reserves by the Central Bank, even at a time when the Official exchange rate remains above $ 1000, will help consolidate the disinflation processwill facilitate the re-monetization and will support the transition to a system of coins competition similar to the Peruvian model.
In an extensive article published in his personal blog, Cavallo said that after the abandonment of crawling peg and the adoption of a flotation between bandsthe intervention of the BCRA to acquire reservations – without the need for the dollar to touch the band of the band— I should not raise inflationas some sectors of the government argue.
“The reasoning of the Central Bank, which argues that this intervention would be inflationary, is not strictly correct,” he explained, added that the necessary issuance to buy currencies would reinforce the demand for moneyIt would help lower country risk and would contribute to sustained growth of GDP.
In addition, he remarked that while they persist Restrictions on exchange access for companiesthe exchange rate hardly is located on the band’s floor. “That the official dollar down too much would not be desirable, because it would affect external competitiveness,” he warned.
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In relation to the real exchange rate, the former official praised the elimination of Withholdings to industrial exportsbut described as “counterproductive” the announcement that the Agricultural withholdings in Julywhich, according to him, “does not stimulate long -term productive investment.”
What Cavallo said about government monetary policy
On monetary policy, he said re-monetization The economy should occur through the purchase of reservations and not through the payment of debt in issues with issuance. “If you want to avoid a rise in the real interest rate, it is necessary to allow the supply of money to increase,” he said.
Cavallo also supported the intention of the Minister of Economy to move towards a coin competition in which the peso and the dollar can live together. To do this, he claimed that the obstacles that prevent banks be eliminated Provide deposits in dollars without having to convert them previously to pesos.
“For the dollar to fulfill all the functions of the peso, the exchange market for companies must also be released, as already done with human people,” concluded the former minister.
Source: Ambito
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