The dollar economists are concerned, especially because of the scarcity of reserves in the Central Bank and the wide exchange rate gap that is perceived between the official and free markets, in a context of strong restrictions.
To find out what can happen with it, iProfesional spoke with Jose Dapena, economist and director of the Department of Finance at the University of CEMA (UCEMA), and MSc in Finance and Economics at the London School of Economics.
In this sense, the expert affirms that the “dollar is expensive, but there are arguments for it to continue rising” and that it faces a new jump in its price.
It also analyzes the gap and exchange trapwhat should be the price of the exchange rate, the impact of the crisis on growth and what can happen with inflation.
-What are the main problems What do you see of the Argentine economy?
-The current economic situation is not good, which is nothing new. Without access to external credit, with Monetized Fiscal Deficit, Historical Tax Pressure, Inflation, and Relative Price Distortiona country risk of 2,400 points and an exchange rate gap of more than 100% cannot indicate anything positive.
-Can the recently announced economic measures mitigate these issues?
-The measures that were taken are not thought of in the long term with the objective of normalizing the economy, but to be able to obtain time until the winter is over, and with it the needs of dollars originating in the energy bill. Namely, what was recently announced regarding subsidies and tariffs aims to comply with what was agreed with the IMF, and thereby try to partially improve the fiscal situation, but without solving the underlying problems.
José Dapena, economist and director of the Finance Department of the CEMA University (UCEMA), warns about the price of the dollar.
-After the exchange rate escalation last month and its subsequent stabilization, what can happen from now on with the price of the dollar?
-The overheating of the price of the dollar in July was caused by unforced errors, with a fairly fragile economic situation and facing a situation of weak reservesdue to energy needs. To the extent that the need for dollars to address these issues is diluted, it may not get better, but I understand that the objective is that it not get worse to meet political needs.
-Is the current price of the free dollar around $300 at an “expensive” level?
-The real exchange rate indicators show that the free prices of the dollars are well above their historical values, however, that does not mean that they are going to fall, since the series show that, nominally, they move in tune with the monetary liabilities of the Central Bank and with the country risk.
So, to the extent that sustained fiscal discipline is not achieved with a reduction in tax pressure, and the Central Bank’s balance sheet is strengthened, it is not possible to have a dollar that is more aligned with historical values, which, in my opinion, It should be between 160 and 180 pesos. The rest is uncertainty and distrust that lead to those market prices.
-In this line, how is the wide exchange gap that is evident between the official dollar and the free bills sustained?
-In line with what I was saying, the gap is the result of the evolution of the official exchange rate and the degree of uncertainty and distrust. To the extent that the official exchange rate begins to lag behind inflation, and an increase in uncertainty is evident, the distance between both references widens.
For this reason, taking into account that at the beginning of 2023 the pre-electoral questions would start with their associated uncertainty, this may negatively influence the gapdepending on how the fiscal situation arrives and what dynamics are printed on the official exchange rate.
In the long run, economic growth is not compatible with a significant exchange rate gapAnd it is not for nothing that the Argentine economy has not grown steadily since the first stocks were implemented in 2011.
The price of the dollar, for Dapena, will remain stable and may face a new jump due to the scarcity of reserves, inflation and uncertainty.
-The high season of settlement of the field is in the twilight, what can happen with the exchange pressure due to the income of a few dollars?
-The energy account was draining lots of dollarsand that led to an uncomfortable situation regarding the exchange rate. To the extent that this situation tends to ease, as a result of a decrease in the need for imports, it could cushion the pressure on the exchange rate. And if we add to that a possible better fiscal situation, as a result of the partial elimination of energy subsidies, in compliance with the IMF agreement, it could improve the situation.
Recall that, according to some calculations, Only energy subsidies in the last 15 years would add up to more than US$110 billion, which would explain approximately a third of the Argentine sovereign debt.
To this relief should be added the dirty effect of inflation on wages and social securityTherefore, the fiscal position could improve and would collaborate in that sense, although without solving the underlying problems, the results of which require a longer term.
-Within the framework of the scant genuine foreign exchange income, what will happen to the low level of reserves?
-There are no elements that justify a genuine accumulation of reserves, so until the elections we will survive managing their scarcity, and in times of greater uncertainty we will have occasional discrete jumps in the exchange rate. That is, there will be calm and jump, then calm and another jump.
-Inflation levels were the highest in 20 years and the trend is high. How do you analyze this panorama?
–The inflationary peak comes from the monetary issue which results from different stimulus plans implemented by the Government, without genuine resources, which imply putting money on the street but in a context of lack of investment and uncertainty. Additionally, the level of interest-bearing liabilities, which is now growing at 96% per year, does not bode well for the status quo.
For this reason, and looking at the balance sheet of the Central Bank and the issuance of remunerated and non-remunerated liabilities, there are no elements that show that inflation can drop significantlybut it would remain at levels as we have seen in recent months. This with a similar evolution for the exchange rate, without considering possible discrete jumps.
Inflation is a parameter of concern, and for Dapena there are no arguments that indicate that it can lower its upward trend.
-Based on this complicated scenario, can there be any way out of the crisis?
-There are not too many ways out, since the government is finishing its mandate, and it only has to endure without the variables getting significantly worse. Without external credit and without a solid fiscal situation, which requires an implementation period and another time to obtain its results, it is not possible to solve the economic problem in a sustained manner, but through patches and negotiations that prevent the situation from getting worse.
-In short, are there no glimpses of substantial changes?
-Without realizing it, we are already at the end of August, a little later we will be in November with the World Cup, and then the holidays. Therefore, it It is more likely that the next few months will be very similar to the previous ones, with a situation that is trying not to get worse, that may have partial improvements, and with speculative leaps as the electoral process approaches.-