It would be the lowest level reached in many years, and it would put Argentina back on the radar of emerging countries, with chances of making a leap in quality in less than a decade and reaching investment grade, as Paraguay did.
The end of the COUNTRY Tax could have an impact on inflation just in the months in which the Government seeks to maintain a monthly number in the area of 2%, to reduce the pace of the crawling peg of the official exchange rate, a scenario that if achieved Maintaining it for a full quarter would pave the way for eliminating the exchange rate.
The tax created five years ago during the beginning of Alberto Fernández’s mandate will cease to be in force in just under a month, and in fact it has already been eliminated for most imports.
Close to Minister Luis Caputo, they highlight that this will come hand in hand with a decline in the price of the dollar: the blue is at $1,125, unthinkable three months ago.
The lowering of the exchange rate for imports and dollarized local and tourist consumption abroad with credit cards will have an impact on revenue.
Caputo hopes that the growth in economic activity will compensate for the drop in revenue. What’s more, although it will not be said publicly for now, the improvement in Gross Product expected by the Economy for 2025 was recalculated to the area of 6%, one point above the previous projection.
The elimination of the PAIS Tax will imply that the costs of inputs for production or finished products from abroad would become cheaper and that should be reflected in the final price.
It would be part of the scheme to “level the playing field” that different sectors of production have been demanding.
Eugenio Marí, chief economist of the Libertad y Progreso Foundation, agreed with the diagnosis that prices will drop.
Especially those linked to foreign trade, but it would reach many others, he explained.
It is estimated that the impact on lowering inflation would be around 0.7%.
The Government has already defined that the variation in the CPI in the coming months will be one of the keys to determining the end of exchange controls during the first months of 2025.
The first objective will be to be able to sustain a quarter of general inflation in the 2.5% area. If the price increase is reduced to levels close to 1% since January, and within that framework progress is made in the negotiation with the IMF, the opening of the exchange rate could come in March or April.
In the event that all these macroeconomic conditions were met, even so, the exit from the stocks would still have other types of challenges.
The main one is to have a sufficient amount of net reserves to be able to meet any demand contained by exchange controls.
For the former Secretary of Finance, Miguel Kiguel, to get out of the trap it would still be necessary to negotiate with companies that want to send dollars to their parent companies, as was done with the importers with the Bopreal.
“Just as the importers were given a bonus, something similar should be thought of with the companies or that they access a quota per month. When the dollar is unified, no one knows if the exchange rate will remain at the level where the parallels are today” , he indicated.
He explained that this is so because “it is unknown what will happen to the dollars stored like those of these companies that could go abroad. This is the Government’s big doubt and the reason why it does not dismantle the restrictions. That is why it is often said that when leaving the stocks it is necessary to separate the treatment given to the flows from that of the stocks”.
For Kiguel, it will be necessary to continue exiting the exchange restrictions in installments.
The economist highlighted the need for Argentina to end the stocks as soon as possible, to improve its reputation in the world.
“Removing it would also help a liberal government that puts obstacles in the exchange system in terms of communication. And it would help in the future because it would not be necessary for someone to join the RIGI to have their money,” he explained.
In this scenario, The market believes that the appreciation of the peso is here to stay, and a new devaluation is not expected in the pipeline.
The peso has only been so appreciated four times in the last 30 years. In the last years of Convertibility, at the end of Cristina Kirchner’s second term, with Mauricio Macri in 2017 and the last months of Alberto Fernández. Each of these episodes was followed by large devaluations of the official exchange rate.
Given this scenario, a report from the consulting firm 1816 left some warnings. They explained that if the international context becomes complicated, the potential for the peso to fall could be large and the BCRA does not have net reserves to deal with it.
In addition, he warned that at this CCL, the stocks of pesos measured at the financial exchange rate already exceed US$100,000 million, if the private M3 + Treasury securities in non-banking private hands are taken.
And he indicated that at this type of change there are uncompetitive sectors (tourism, regional economies, some industries) that, if the status quo persists, could destroy employment without the guarantee that other more dynamic sectors can hire said workers.
Still, the report gives rise to optimism. It highlights that the combination of a country with a fiscal surplus (something that was not present in any of the 4 mentioned opportunities, the potential Vaca Muerta on the horizon and money laundering as a bridge in 2025 forces us to take seriously the possibility that the appreciated real exchange rate may extend over time.
By José Calero, from Noticias Argentinas agency
Source: Ambito
I am Pierce Boyd, a driven and ambitious professional working in the news industry. I have been writing for 24 Hours Worlds for over five years, specializing in sports section coverage. During my tenure at the publication, I have built an impressive portfolio of articles that has earned me a reputation as an experienced journalist and content creator.
