The virtue of temperance

During the last few days we have heard in almost all the media that the Government would advance in the announcement of a special dollar that stimulates farm exports and another that penalizes imports of luxury supplies and services that do not affect food or energy.

In the last days preceding my departure from the cabinet of ministers, I made a proposal exactly along these lines that caused a stir and political and media controversies. I am not interested in analyzing the circumstances that generated this change of direction just three months after that moment; In any case, I think it would be valuable to think about how much damage we would have avoided in terms of inflation and its impact on the purchasing power of wages.

Why a doubling (or the title that we want to use to define the existence of a different exchange rate for some imports and exports) can be an effective instrument for this moment in Argentina and the point of economic reality in which we find ourselves?

Few times in our history have we gone through a situation where an alarming level of very low reserves is combined with a regime of very high inflation and a political context of high uncertainty due to electoral eve. If we add to this a punctual climatic situation this year with an extreme drought that took twenty billion dollars from us, half of which was already verified in the first semester of last year, it is clear that exchange rate policy requires a planned, transparent and predictable administration.

Why not an outright devaluation or a unification of exchange rates that frees us all at once from the hated and pernicious trap?

In class 1 of currency devaluation, it is studied that it is a hateful and unpopular measure that only makes sense if competitiveness is really gained, for which it must promote a real change in the relative prices of things. For this to begin, the government that applies it must enjoy sufficient public trust to be credible; It goes without saying that both things need to be accompanied by a comprehensive security plan, something that we repeatedly expected in the last eighteen months but that never happened. It would be strange and even counterproductive to think of something like this a few days before the PASO and months before the general elections.

In stocks class 2 (it is 2 because there are few textbooks that contain a stocks chapter…) they teach you that if you are going to lift all exchange restrictions from one day to the next, it is highly recommended that you do so with enough reserves in the BCRA to respond to challenging market operators who will ruthlessly try to twist your arm for several weeks. Needless to say, our reserve situation, whether gross, net or liquid, is extremely weak and prevents us from responding, even if we can get some temporary handout from the IMF. In this, the temperance of the blacksmith is a vital quality to avoid breaking everything.

In conclusion, a temporary exchange rate unfolding, which orders the marketing of the meager currencies, seems a logical, pragmatic and very reasonable measure for this country in these circumstances.

They are told by one of the many machos from the off who knew how to be on both sides of the counter.

*Professor FCE UBA – Former CEO MNC. Business consultant.