Dollarization was one of the campaign promises Javier Miley and both the President and the Minister of Economy, Luis CaputoConfirmed that it is still standing, but one of the comprehensive consulting firms What paths does the government have regarding the monetary panorama?
Report prepared by me 1816 It shows how the government makes choices Make dollars legal tender in Argentina In addition to describing what will happen if the action is finalized.
“Mili and Kabuto both said that's not all Dollarization remains a goal, but this goal is closer today At the time of inauguration,” they cited from the consulting firm, the president “already made explicit references to BCRA procurement at the MULC. The decline in central bank liabilities was partly due to liquidity and partly to Leliq/repo swaps for Treasury bonds.”
Faced with this panorama, from 1816 they considered “Shortening of BCRA equilibrium reduces the distance to recovery of liabilitiesBut this reduction is partly a displacement of short-term Treasury borrowing (in bank portfolios). Ultimately does not eliminate the risks of dollarization For organization.”
What options does Milei have for raising dollars?
Based on the current economic panorama and the results generated since Miley took office, the report anticipates that the executive branch will find itself. Two options for monetary policy action.
“We are moving towards a stabilization program that seeks to reduce inflation by rebuilding confidence in the peso, or we are passing the first phase on the road to dollarization.“?” They asked themselves in a speech published this week.
Their answer is “At some point in the second quarter, the government will be in a position to decide whether to maintain the course of monetary policy (ie, if we proceed with negative real rates to eliminate debt) To dollarize or take advantage of the large room for maneuver (provided by deflation of the economy) make a change in monetary policy (move to positive real rates) and accelerate inflation.”
These two paths the government will take will be defined in the coming months and will mark not only the fate of Javier Mili's mandate, but Argentina's future in the coming years.
“It's one or the other: If nominal rates are above inflation in the second phase of the Caputo plan, BCRA's (and the Treasury's) peso liabilities will grow in real terms and dollarization will become more distant. “It will be at this crossroads when the government reveals the true nature of the Kaputo program,” they opined.
Bobriel “Risk Free”, Dollarization and Credit: Key Definitions of Economics
It remains to be seen what both Miley and Caputo will do, whether they will decide to follow the path they have declared on many occasions during the campaign and since the inauguration of the government, or if, on the contrary, they will support the peso as the currency. Other economists suggest
“for now, Since the economic policy guidelines were announced on December 13, liquidity has progressed as expected and the government has kept options open.“, they closed in 1816 on the paths to the future of the executive branch.
