Dollar and “la tablita”: the exchange mirages that undermine the future

From March 1976 to June 1981, the exchange rate policy in Argentina was a fixed exchange rate (the BCRA undertakes to buy and sell currencies at an established price). The domestic inflation rate in relation to internationally tradable goods had to be adjusted to the devaluation rate, plus external inflation. The internal nominal interest rate was to reflect the alternative nominal yield reflected in the domestic currency prevailing in international markets.

What allows us to distinguish the stages politically is periodization. Economically, exchange rate policy and the way in which the exchange rate is adjusted. The implementation of the exchange rate table under the de facto government in Argentina (December 1978 to March 1981) marked a crucial period in the country’s economic history. Implemented by José Alfredo Martínez de Hoz, this policy sought to stabilize prices through a scheme of pre-announced devaluationsknown as “tablita”, which sought to anchor inflationary expectations.

However, far from meeting its objectives, this model turned out to be inefficient, deepening macroeconomic imbalances and leading to an economic and social crisis that marked the collapse of the neoliberal project of that time. This article attempts to succinctly analyze the reasons for its failure, its impact on the country’s economic structure and the lessons it offers to analyze the current economic moment.

Conceptual framework and historical context of the failed attempt

The exchange rate “tablita” was implemented in the context of a civil-military dictatorship, where the economic project was aligned with the rise of international neoliberalism. According to Basualdo, the accumulation model in Argentina during this period was strongly influenced by financialization and unrestricted openness to trade and capital flows. This scheme sought to discipline the country’s businesses, through the commercial and financial liberalization of the economy, which implied a direct attack on the local industry and the purchasing power of the popular classes.

Canitrot describes how “discipline” became a political objective of technical elites linked to organizations such as the IMF and the World Bank. In this framework, the “tablita” was a key tool to generate a transfer of income from the productive to the speculative sectors, consolidating a power structure favorable to financial capital.

The inefficiencies of the model

The failure of the exchange rate table can be explained by a combination of errors in the design and implementation of the policy:

• Exchange rate appreciation and “advanced desubindustrialization”: The overvaluation of the peso favored imports, harming the national industry. Schvarzer argues that this policy dismantled key industrial sectors, creating a structural imbalance in the economy, but it also destroyed Argentine light industry. To give just one example of the place occupied by the national industry, we will mention: household appliances Helmetwhich employed 1,500 people in a fully integrated industrial plant of 42,500 square meters covered, on 8 hectares, in the La Matanza district. That company with a good level of profitability and permanent reinvestment Until June 1977, it exported small appliances for home comfort to 26 countries, including the United States, Brazil and Israel. In 1979 it was finished…
• Increase in external debt: Financial openness and deregulation encouraged the taking on debt in dollars. According to Mariana Heredia, this consolidated an external dependency that would exacerbate the country’s vulnerability to external shocks.
• Increase in internal debt: Financial openness and deregulation encouraged increases in interest rates for national companies that used bank financing. On average, medium and large companies went from paying a maximum of 27.69% (TEA) to 96.132% (TEA). That is, by taking a static liability, companies began to have a financial cost of triple in terms of lending rates, from May to June 1977.
• Inflation and regressive redistribution: Although inflation initially subsided, the exchange rate anchoring did not attack the structural causes of the problem, considering the theoretical framework chosen by the economic leadership.
• The fiscal and monetary lack of control was excessive: Public spending was exuberant. Although I tried to sterilize the monetary issue in every way, including through a mistake called “monetary regulation account”, nothing worked. This resulted in repressed inflation that eventually overflowed, mainly affecting the lower-income sectors.
• Financial speculation: The liberalization of financial markets created fertile ground for speculation. Interest rates did not satisfactorily reflect inflation expectations. Canitrot maintains that large economic conglomerates took advantage of the gap between interest rates and pre-announced devaluations to obtain extraordinary income, at the expense of economic stability. In reality, the large groups that saw the situation and had debt capacity and relations with foreign entities, or operated with local banks with correspondents, dedicated themselves to the “carry trade”, or “financial bicycle”. Those who did not have access succumbed.

Economic and social impacts

The collapse of the board in 1981 left a negative balance in the Argentine economy. Among its main consequences are:

• External debt crisis: The accumulation of debt reached unsustainable levels, becoming a mortgage for future generations.
• Prolonged recession: The fall in industrial activity generated an increase in unemployment and job insecurity.
• Income concentration: The transfer of resources to the financial sector consolidated a regressive model of income distribution, widening the gap between rich and poor.

Experience 2024 “Caputo’s little tablet”

In 2024, investors who took advantage of the crawling peg and opted for assets in pesos obtained significant returns, far exceeding the depreciation of the dollar.

Featured Performances:

• Treasury Bonds in Pesos: The TO26 bond (October 2026 Fixed Rate Bond) recorded a return of 236.6% in pesos, which becomes a 176% gain in dollarsconsidering the exchange rate evolution.
• Banking Sector Stocks: The shares of Argentine banks, such as Grupo Financiero Galicia, Banco Supervielle, Banco Macro and BBVA, led the increases in the Merval index, with increases of more than 300% in pesos. The index Merval, as a whole, increased by 127% measured in dollars, reaching levels not seen since 2018 (Macri-Sturzenegger-Caputo).
• UVA fixed term: This investment tool, which adjusts capital according to inflation, offered a return of 150% in pesos, equivalent to more than 90% in dollarsgiven that the free exchange rate rose approximately 30% in the year.

These results show that, in a context of exchange stability and restrictive monetary policies, investments in pesos were highly profitable in real terms and in comparison with the dollar.

In 2024, the Argentine economy again experienced a significant crisis that severely affected the industrial sector and small and medium-sized businesses. According to data from the National Productive Front, around 16,500 SMEs closed their doors during the year, with 10,000 closures between January and July, and an additional 6,500 between July and October (ámbito.com November 10, 2024). This phenomenon had a direct impact on employment. Likewise, registered salaried jobs were reduced by 220,178 (2.2%), according to SIPA data. The information comes from the latest report from the Vector Consulting, by Eduardo Hecker. (ámbito.com December 16, 2024)

The unemployment rate in Argentina was 6.9% in the third quarter of 2024, affecting almost 1.5 million Argentines, another 2,534,000 are underemployed. Despite the improvement compared to the second quarter of 2024, the number of unemployed has increased by more than 280,000 people compared to the same period last year (Source: Indec, December 18, 2024).

Lessons

Both the case of the Martínez de Hoz exchange rate table and the Caputo exchange rate table demonstrate the risks of adopting stabilization policies that do not consider the structural particularities of the national economy. In particular:

• The need to review the trilemma, or “the impossible trinity” that indicates that it is inadmissible for a country to simultaneously maintain a fixed exchange rate, the free movement of capital and an independent monetary policy (1962, Fleming Mundell). They stated that no more than two of those three objectives could be achieved.
• The importance of a competitive exchange rate as a tool for industrial development.
• The need to regulate capital flows to avoid debt overhang crises.
• Stop the growth of public debt. Until October 31, 2024, the accumulated growth of public debt climbs to $91,879 million, marking an increase of 25%.
• The relevance of designing policies that favor inclusion and equity.

The result: a collapse of around 3% of GDP (p.)

Both the failure of the Martínez de Hoz exchange “tablita” or the Caputo “tablita” was not an accident, but the result of an economic model that prioritized the interests of financial capital over the needs of development. These episodes had been investigated by various authors in order to avoid the repetition of similar errors in the future. The Argentine economy is stumbling over the same rock again, reviving policies that promise stability but that, in reality, deepen social and economic inequalities. The Martínez de Hoz y Caputo 2024 exchange tables share a tragic legacy: prioritizing financial speculation over production, benefiting a few at the expense of many, and dismantling the industry in the name of precarious stability. These models, dressed in technical solutions, are nothing more than mirages that mortgage the future of the country.

History teaches us that True development is not built on pre-announced devaluations. Persisting in these mistakes is not only a bad economic decision; It is an act of historical irresponsibility. Argentina remains trapped in a vicious cycle of broken promises and repetitive policies. Luis Caputo’s crawling peg in 2024 is nothing more than a reinvention of Martínez de Hoz’s failed exchange rate table, both models based on speculation, indebtedness and abandonment of the productive apparatus. These strategies, although they look attractive to financial markets, have proven to be devastating for employment, industry and social equity. To persist in these economic recipes is to condemn the country to a future of greater exclusion, vulnerability and external dependence. It is time to discontinue this paradigm and prioritize policies that promote inclusive and sustainable development, before it is too late.

Director of Esperanza Foundation. https://fundacionesperanza.com.ar/ UBA Postgraduate Professor and Master’s Degrees at private universities. Master in International Economic Policy, Doctor in Political Science, author of 6 books