Guzmán’s enigmatic answer about the lack of dollars: did he want to unfold the market and they didn’t let him?

The economic cabinet that debated the options for the dollar

The Minister of Economy, Martín Guzmán, hinted that the possibility of unfolding the exchange market was discussed in the government so that there would not be so much loss of Central Bank reserves, but he clarified that the proposal was not accepted within the ruling party.

The proposal to unfold the official exchange market was debated several times in the economic cabinet, where some defended unfolding the official exchange market and others an exit through restrictions on the outflow of dollars, which in fact generates different exchange rates. , as it happened since the end of 2019. Past experience, especially in the 1980s, indicates that a split usually leads to a financial dollar that shoots up and drags down the rest of the prices, which results in a deep devaluation and an acceleration of inflation.

Due to these antecedents, both this government and that of Cristina Kirchner They chose to impose restrictions to control the outflow of foreign currency instead of the split, at the cost of generating a lower level of activity, among other reasons, due to the strong exchange rate gap, which reached 100% and now remains around 70%. %; this gap, in turn, distorts the functioning of the economy and slows down the accumulation of Central Bank reserves, one of the three key goals of the agreement with the International Monetary Fund (IMF) and a fundamental input for the economy to grow.

In this sense, in a report with the program “Toma y Daca” on AM 750, in which he anticipated that inflation in May will be lower than in April, Guzmán was asked why as many dollars are not entering Argentina as expected. anticipated.

In response to this query, the official replied: “It’s not that they’re not coming in, there was a $14.7 billion trade surplus in 2021.”

“The question is why there was no alignment between the trade surplus and the accumulation of dollars”, indicated the minister. “Why did it happen? When looking at each of the factors, on the one hand between 2020 and 2021 there were 8.3 billion dollars in private sector debt payments, not only because during the previous government the public debt grew by 100 billion , but private sector debt also grew in the previous administration. The debt collapse hit the entire economy,” he said.

“When it was discussed privately there were different proposals and there was one that said: we have a formal market to service debts in foreign currency so that it does not affect the level of reserves, in a context in which there was a lot of demand for foreign currency.. And no one said let’s go there “clarified in reference to the possibility that the foreign exchange market would unfold, with one dollar for the financial market.

There were different proposals and one said: let’s have a formal market to service debts in foreign currency so that it does not affect the level of reserves, in a context in which there was a lot of demand for foreign currency. And no one said let’s go there (Martín Guzmán)

However, Guzmán explained that finally “He went the other way, because of a rule that is going to be maintained; the worst moment in terms of foreign exchange demand was 2020 and 2021″.

“The rule said the Central Bank that it gave you only 40%, and 60% you have to refinance outside the single free exchange market”accurate.

“The problem was so big that, despite the fact that the Central Bank only gave you 40%, there was a lot of outflow of dollars to pay those debts, but this decision that the entire Front of All adopted, and there is no turning back.”

Then he clarified: “We knew that if we went there, 40% of the dollars were going to be taken by the companies and they were less dollars for the Central Bank.” However, he admitted that with this exit “companies were capitalized and this implied greater productive capacity in the future, at the cost of having accumulated fewer reserves.”

Martin Guzman and Miguel Pesce
Martin Guzman and Miguel Pesce

And then he finished: “There were different positions and visions, but this one was adopted and everyone knows it well. A decision was made and the consequences are these.”

In addition, he recalled that there was also an outflow of dollars due to the heavy maturities with the IMF in 2020 and 2021, as a result of the credit that the government took from Mauricio Macri. “That is why it was so important to reach a refinancing agreement for the debt that the previous government took, which was not used for people to live better, that money was gone: the debt was paid and the formation of assets abroad was financed. ”.

“The non-agreement meant fewer dollars and that means fewer dollars and fewer reserves and then the exchange rate goes to any value,” said Guzmán, once again defending the agreement with the organization that was signed last March.

“Economic growth also demands dollars from you and this year we can continue to grow at a speed to accumulate reserves. And if we accumulate more reserves this year, we will be able to grow for a third year,” concluded Guzmán.

The opinion of the economists

In relation to these words of the minister, the director of ECO GO, Marina DalPoggetto, he claimed: “If the market had unfolded, which is what I interpret the minister to have said, the financial dollar would be at another level, close to the current financial dollar; in fact, last year the free dollar market was intervened”.

If the market had unfolded, the financial dollar would be at another level, close to the current financial dollar (Marina Dal Poggetto)

Anyway, Dal Poggetto stated: “Initially you could have gone to a smaller gap with another decision, such as redefining the debt in pesos when the main investment funds were in pesos, because the Argentine debt generated a great return for foreign banks”.

“At the beginning there was not a big gap, it was 20 percent, but later it was announced that the adjustment would be less than expected due to the vice president’s claim,” Dal Poggetto said.

For its part, Maria Castiglioni He agreed with the interpretation and stated: “The stocks were chosen instead of the split, but what the Government does not understand is that so many dollars do not come out with stocks, but they do not come in either, and for that reason reserves are not accumulated,” one of the goals key to the agreement with the IMF and one of the most difficult to achieve this year.

Stocks were chosen instead of splitting, but what the Government does not understand is that so many dollars do not come out with stocks, but they do not come in either and that is why reserves do not grow (María Castiglioni)

“Today you don’t accumulate reserves because the surplus is smaller and because the exchange rate gap is huge; In addition, exports hardly grow due to the delayed exchange rate and the gap, while imports grow because everyone prefers to advance purchases from abroad, ”he explained.

“It is true that undoubling the exchange rate implies admitting a devaluation that the government evidently did not want to recognize given Argentina’s previous experiences with exchange rate unfolding,” Castiglioni said, referring to Guzmán’s enigmatic and exculpatory response.


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