A classic of the seventies, in the last century, was the little board by Martínez de Hoz (Joe), and in the eighties, it was the phrase of Minister of Economy Lorenzo Sigaut (03/23/1981-12/21/1981): He who bets on the dollar loses! Since the latter until today there have been almost 35 ministers of economy, including Lorenzo who succeeded Martínez de Hoz (03/29/1976-03/29/1981). According to the External Debt Observatory of the University of La Punta, San Luis, José Alfredo Martínez de Hoz (August 13, 1925 – March 16, 2013), studied law and received his doctorate from the Faculty of Law of the University of Buenos Aires, and was a politician and university professor. His mother, Carolina Cárcano Saez de Zumarán, was the granddaughter of the famous conservative politician Ramón Cárcano who was governor of Córdoba, a diplomat and an important historian. His father, José Alfredo Martínez de Hoz, was an Argentine rancher and president of the Sociedad Rural Argentina between 1946 and 1950, an investor and member of the board of directors of several companies, including La Forestal, and the owner of large tracts of land linked to agricultural and livestock exploitation, such as the Chapadmalal stud farm.
The plank gave rise to various debates in those years (1979-1980), some of which led to meetings that lasted all day to decide whether or not to continue with the plank, a stop for lunch and then to continue. Joe (as those close to him called him) listened to everyone. But he received a visit that was taken as pressure – a classic, too – from the agro-export sector. Who were they? According to Ezequiel Burgo’s book “Siete ministros”, Bunge&Born’s number one, Mario Hirsch, went to the minister’s office, along with Orlando Ferreres, the economist and director of the group’s Center for Economic Studies. The approach was forceful: The increasingly cheaper dollar lowered the group’s profit margins.
Appreciation can generate distortions in profit margins, it can generate momentary stability. With a lower demand for imports, due to recession, the low demand for imported products will then be resold at a different exchange rate, pressured and justified by the “expectation of devaluation”: illegal dollar. This week the anti-caste anarcho-capitalist government had to intervene in the financial dollars. Yes, Milei, the liberal-libertarian, had to intervene in the market. An interesting parenthesis from the book is precisely a quote from the economist and journalist Enrique Silberstein: The agricultural oligarchy of the province of Buenos Aires is a staunch defender of devaluation because it allows it to increase its fortune and reduce its debts.
A fact: this first semester the liquidation of foreign currency was 11 billion dollars, compared to the first semester of 2023, there was no increase, they liquidated the same. The intervention in financial dollars had the objective of reducing devaluation expectations and lowering the country risk, a failure in the latter. The objective of deactivating the devaluation expectation only lasted a short summer. The reserves are negative as when they took office. They could not change that equation. Faced with this, Minister Caputo – and Boggiano – said: Reality will prove that soon people will have to sell dollars to pay taxes and the peso will be the strong currency!
The dollarization plan, the closure of the Central Bank and the liberalization of the purchase/sale of dollars are in strong tension/debate by the external sector and the IMF. And here comes the third pressure – exporters, illegal dollar – which is the IMF that asked the Treasury to eliminate the BLEND dollar. Added to this lack of dollars is the lack of pesos from collection where it seems that the country tax had a good performance.
In this context, the devaluation of August 2023 and December 2023 set the conditions for a permanent rodrigazo in the first half of this year. A measure in line with what the IMF suggests.
The anchor of stability was wages, fiscal adjustment – not paying bills – in this context, with an average inflation of 270%, with a decelerated monthly variation. Can they meet the 2% target? Without dollars or pesos and with the IMF program, the combination is expressed in the latest economic and social data, clearly anti-industrial. The first five months, accumulated, of the year, compared to the previous year, economic activity plummeted by -2.9%.
Will funding arrive? Are they waiting for Trump to win? November 5 is a long way off. It is useless to reach 2% when more than half of Argentina is hungry and dying, due to lack of delivery of medicines and food that is not distributed, a silent death is sweeping through the country, as it happened during the nineties of the last century.
Returning to our historical parallel, and taking into account Lorenzo’s statement, let’s see how the previous events unfolded. Joe had received Hirsch, and that pressure, along with the young Orlando Ferreres, meant one thing: that they no longer supported his plan. Did any of them go to talk to Toto and Javo? We don’t know.
Following this story, Joe refused to leave the board, Ricardo Arriazu, father of the board, young economist of the Central Bank in that period, knew together with Walter Klein -Joe’s number two-, Adolfo Diz another economist of the Central: For them, it was possible to converge to lower inflation rates if the schedule of updates on the exchange rate and tariffs was respected.. Because abandoning the little board –exchange rate appreciation– it would mean failure for him. Recently, Arriazu himself – an economist who defends Javier Milei and is one of the most listened to by businessmen in Argentina, Arriazu MacroAnalysts-I comment in a note by journalist Ezequiel Burgo the following: In terms of exchange rates — Arriazu explained in a talk to investors this week — they made a program like the sixties/seventies, which consists of giving a jump to the dollar, an overshooting, that is, an increase greater than necessary, and then establishing a fixed devaluation rate that was 2%, but could have been 1%. The number does not matter, what is important is that it is fixed and it is the key to the program because it is what lowers inflation. The economic ideas/thoughts developed in higher education institutions have repercussions in the present if they are not questioned after failed experiences such as the Arriazu-Hoz Tablita. Recently, an economist Haroldo Montagu (VECTORIAL consulting firm) also commented that “they see the macro with a financial perspective,” and the data of the real economy is suffering. Of the five instruments: monetary, exchange, foreign trade, income and fiscal, it seems that the synchronization that would lead to an optimal social result is going wrong.
But let’s go back to how the plank went, eight months (1979) after this plank was fulfilled, two events occurred: one, Volcker, a monetarist, raised interest rates, he was the head of the Federal Reserve, which opened the way to the debt crisis in Latin America during the eighties; two, the bankruptcy of the Regional Exchange Bank (1979), letting it go bankrupt, for Joe demonstrated an unconditional attachment of the economic team to compliance with the rules and the absence of privileges for large groups. The bankruptcy of the BIR was a hard blow. The Minister of Economy trusted in his method to lower inflation, appreciation and fiscal adjustment and opening. Even Zimmermann -Superintendent of Financial Entities- said: Inflation is dead (1980).
The tensions at that time resulted in the departure of dictator Rafael Videla and the assumption of power of Roberto Eduardo Viola, who asked Joe’s chief of staff to maintain the plan and adjust the exchange rate. Viola said that Joe and the president of the Central Bank were arrogant. Martínez de Hoz was no longer the ZAR of the economy -there are others of lesser rank-. The story of this process well narrated in “seven ministers” leaves us with a clear ending: Martínez de Hoz says he gave Margaret Thatcher advice on how to make economic policy. It was London in 1980 -Marley and Clash-:
-If you had to give me just one piece of advice for undertaking a reform similar to yours, what would you say?
-Look, if you have conviction, you should listen to everyone, don’t close yourself off. That will help strengthen your position even more. But stick to it at all costs, you shouldn’t care about criticism. There is an expression in English that says: >
Maggie interrupted him and, staring at Joe, said excitedly:>. It would be
Lorenzo Sigaut (1981), who came from the industrial sector, the FIAT group, stated accurately that: Those who bet on the dollar are going to lose because we have eliminated the level of overvaluation, he said with determination on June 19, 1981. The phrase was popularized later as “He who bets on the dollar, loses. As soon as he assumed office in April, Sigaut ordered a devaluation of the peso by 30.41 percent, as an incentive for agricultural and industrial production and to discourage speculative capital movements. The rest is history, then came the foreign debt crisis, the arrival of Roberto Alemann, which did not solve the problem of the dependence of the Argentine economy on international banking and international organizations.
Economist at UBA, Professor of Latin American Structuralism at UNDAV
Source: Ambito
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