Chief Economist of FIEL, Daniel Altanarated Argentina economic outlook After the parliamentary elections, the focus was on foreign exchange accumulation and the prospects for the exchange band system.
Regarding recent fluctuations in the foreign exchange market, experts pointed out the following. economic concerns are understandableGiven that there is always the possibility that it could lead to an economic contraction and accelerated inflation.
But then he remembered what had already happened. Two tense moments resolved without serious consequencesThe first time was before the IMF deal, when a major currency depreciation was expected but never materialized, and the second time was during the midterm elections.
Mr. Altana acknowledged that authorities were correct in thinking that much of the confusion he said was responsible. “Kukarisk”. The situation stabilized after the election phase, he revealed.
Importance of international reserves
The economist stressed that in relation to reserves, Argentina has set periodic targets and undertaken commitments with the fund to significantly increase assets over the next 10 years. But now this country is That’s $9 billion less than the goal planned in December.
For Altana, securing foreign exchange reserves is essential even with a flexible exchange rate regime. In dual-currency economies like Argentina, pesos are in circulation, but dollars are the dominant currency for savings and important transactions. Exchange rate fluctuations create tension.
For this reason, countries with similar characteristics, such as Uruguay and Peru, Reduce volatility and prevent sudden spikes.
In addition, the expert emphasized that reserves meet the following conditions: Prevention function: In the event of an external shock that could impede access to international finance (as in 2009), it acts as a “crisis insurance” that allows debt repayments in dollars for several months even if markets are temporarily closed.
US de facto support
Regarding North American assistance, Altana observed that it works as follows. “Virtual backup”: There was talk of 20 billion, and although the payment did not materialize in the end, the tension also subsided.
“In a stressful scenario like before an election, The owner of the dollar showed up and calmed you down a bit.” he said.
Along these lines, economists contrasted US swaps with Chinese swaps, highlighting the easier access of the former. In China, on the other hand, each use requires specific permission. In the case with the US, the mechanism will be more automated. There were even versions circulating of a recent small-scale invocation to cancel Argentina’s obligations, he stressed.
Regarding the other 20 billion line mentioned, Altana interpreted it to be used to refinance debt maturities in 2026 and 2027. If Argentina lacks the foreign currency to honor these commitments, This support makes it easier to obtain resources at reasonable rates.
Risks of maintaining the band system
Internationally, Mr. Altana explained the market pressure to remove the exchange rate band while the government maintains the exchange rate band. It is believed that buoyancy systems work more effectively —Free in developed countries or with moderate intervention in emerging countries.
Experts have always understood the band as follows. “Transitional period to floating” And he recalled that the president said it would remain in place until the end of October, without saying whether it would be changed or abolished after that.
According to Altana, the dangers of gangs are tied to unsustainable equality. If the natural equilibrium of the market requires an exchange rate higher than the upper limit of the band, the central bank must sell reserves or use swaps.
“When you start defending equality that is intolerable for fundamental reasons, all you’re doing is shit.” Draw funds to sustain less established bands” concluded.
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