Global Courant
The virtual president of the Central Bank in the event that Javier Milei wins the elections on October 22nd is these days relativizing the dollarization idea of the libertarian leader.
Emilio Ocampo said: “We propose the freedom to choose the currency that everyone wants to use. The peso will be abolished by the people, not the government.”
A bimonetary system – which Carlos Melconian, virtual economy secretary, is promoting in the event that Patricia Bullrich becomes president – is different from total dollarization, but both would need a common denominator.
Achieving a balanced budget, meaning that the state does not spend more than it takes in, is a goal that is rarely achieved in recent Argentine economic history, as economists claim, but that is decided by politicians.
Economic uncertainty is approaching its peak these days and is reflected both in a rise in the blue dollar above $800, in the fall in bond prices and the increase in the country’s risk rate, as well as in a level of currency trouble that, thanks to this, none Ministerial candidate Sergio Massa’s “loose change” plan seems to have its limits.
Ocampo predicts that people will exchange pesos for dollars, and Massa backs up the forecast by increasing the supply of pesos and intensely stoking inflation in the coming months.
The shortage of dollars from the government is getting worse, the soybean dollar 4 did not contribute $1.5 billion and part of these dollars went to supply the CCL dollar supply that seems to have woken up in the last few hours.
A report from consulting firm Quantum said the central bank had lost $17,256 million so far this year and that it had used more than $3,200 million to intervene in free foreign exchange markets during the same period.
With negative net cash reserves of $13,535 million and a mountain of pesos accumulated in the central bank through Leliqs (liquidity exchanges) and repos operations amounting to $20 billion, the plan generates a monthly output of $2 billion dollars for paying interest. Milei’s dollarizer remains the center of attention.
Titled “Dollarization: Ocampo Plan and Bank Runs,” consultancy 1816 says Milei would need to raise $26 billion and that the project is ambitious.
If it “works perfectly, it would allow the elimination of inflation without hyper, Bonex plan or default,” but if it fails, “the result would be dramatic.”
The turmoil is to be expected and the surge in inflation following the August 14 devaluation (economist Marina dal Poggetto forecasts 11.1% for this month) led to a further rise in poverty and food prices, although Massa kept the official dollar until after the elections $350 was set on the 22nd of this month.
For the Monetary Fund, Massa’s expansionary measures add challenges to the “complex situation” in which Argentina finds itself, and the dollarization proposed by Milei is “not a substitute for sound macroeconomic policies.”
In light of these warnings, banks are experiencing lower renewals of fixed-term deposits in pesos, and traders and SME entrepreneurs emphasize that no one will accept checks dated after the elections and that maintaining inventory levels is a common denominator.
Stock market coverage deepens in the heat of uncertainty brought on by the election at the end of the month after an electorate split into thirds and extreme economic proposals were put forward.
The middle point focuses on Carlos Melconian and aims to achieve a fiscal balance with double currency in circulation and a double foreign exchange market that prevents a sudden increase of one dollar and thus a new hyperinflation in Argentina.
The paths to an orderly transition to stability are narrow because the imbalances in the main variables (dollar arrears, interest rates, salaries, pensions, etc.) are pronounced and tend to worsen.
22 days before the elections, economic uncertainty is growing and the political processes are in power.
