2023-04-24 01:02:00
The former Minister of Economy, Domingo Cavallo, referred this Sunday to the debate on dollarizing the Argentine economy and the impact that this measure can have on the country. In this sense, he criticized the official policies, which he described as “wrong”, along with reaffirmed the need to unify the foreign exchange marketwhich would allow, according to him, the dollar to fall and, consequently, inflation.
Asked regarding current policies, the former head of the Palacio de Hacienda stated in dialogue with TN what “The exchange management of this government is wrong”. In this sense, he asserted that “devaluations do not solve any problem” and that “at some point it will be necessary to achieve the unification of the exchange market, with freedom to buy and sell dollars.”
Dollarization divides Argentina: exit or entrance to the economic labyrinth?
Regarding the possibility of dollarizing the economy, the former official explained that it would be possible with a new government, which should “propose a very good organization of the economy that takes measures that lead to solving the great imbalances that exist in the fiscal sphere and with the relative prices”. Along these lines, he stressed: “The biggest imbalance is not the exchange rate delay, but the fiscal imbalance”.
And he added: “They let themselves be with the rates and there are a large number of prices that are behind. The least backward of all is the exchange rate. At the official exchange rate, economy prices are not expensive. Rather they are cheap compared to anywhere in the world.”
Continuing with the warnings regarding the devaluation, Cavallo maintained that, in the event of “a strong devaluation”, wages “are going to be much more behind.” “The devaluation does not solve any problem because the devaluation is more inflation”he stressed.
The solution to get out of a “crisis in the foreign exchange market”
After warning regarding the consequences of a devaluation, the economist insisted on the need for it to work a “free market for all kinds of transactions”. In this sense, he explained that to achieve this objective, the Central Bank should only sell dollars in the official market to pay for imports and debts for previous imports. Added to this, he maintained that “for all other types of use,” the monetary entity “does not have to sell dollars.”
“A free market for all types of transactions must be allowed to function. In this scenario, the dollar would be lower than the current blue and the cash with liquidation. If a free market is enabled, not only will people go to buy dollars for all uses, but there will be the possibility of capital entering that market legally and that will put a ceiling on it. Now there is no mechanism by which dollars can enter at the market price. In all the nationalization processes, the free dollar tended to go down and that makes inflation go down,” said Cavallo.
And I add: “The unification will not be due to a strong devaluation. If the government succeeds in the announcements, the measures and inspires confidence, that very high price that will be in the unfolded free market will begin to fall.”
Javier Milei presented his plan for dollarization and reduction of public spending before “the red circle”
In addition, the former minister referred to Milei’s project to dollarize the economy, for which called the libertarian “politically well-intentioned”. “By proposing dollarization and making the speech that the best period in Argentina was that of Menem-Cavallo, Milei appropriated the idea that he will be able to stabilize as we stabilized in the 90s. In this way, he became the politician who says that he is going to solve the issue of inflation“said the former official.
“Dollarization will only be possible when the exchange market is unified and freed. For that, You have to think regarding how to go from one point to another without a traumatic process for Argentines. I know that this is the process for which the economic teams of Together for Change are working and I think that Milei is also working on it,” argued Cavallo.
“Someday dollarization will be a way to stabilize the exchange rate and erase inflation in Argentina, it’s a posibility. So is going to a convertible or through a inflation targetingIn other words, managing monetary policy and the interest rate in such a way that the exchange rate is stabilized and inflation is lowered or eliminated, although I see the latter as more difficult with the Argentine experience. All this needs a prior process for which the economic team of the next government has to prepare,” concluded the former Minister of Economy.
mb / ds
You may also like
1682300134
#Domingo #Cavallo #governments #exchange #management #wrong
