The Frustrated Search for a Consistent Monetary Framework
Monetary policy has been the weakest link in an otherwise orthodox and solid economic program. Over the past twenty months, there have been many back-and-forths. One clear example was when authorities claimed that there was no more money printing because the broad monetary base wasn’t growing. In reality, the traditional monetary base—the one that actually […]
The Opposition Isn’t Helping Either
The second half of the year kicked off with tension for the government. On the economic front, it’s a time filled with challenges. First, the exchange rate is back in the spotlight, adjusting to higher levels as the soy harvest winds down and the incentive to export driven by lower export taxes fades, and the […]
Who Pays for the Current Account?
The IMF program has placed the need to accumulate reserves at the center of the economic agenda. Alarm bells rang when INDEC reported that Argentina posted a current account deficit of more than USD 5 billion in the first quarter. This means that imports of goods and services, tourism expenses, interest payments, profit remittances, and […]
The Dilemma Returns: Inflation or Growth
During the early months of the economic program, the decline in inflation had an expansionary effect on economic activity. The drop in the inflation tax eased the burden on real incomes, negative interest rates encouraged households to spend, credit grew strongly, and a part of consumption, which was repressed, rebounded in a meaningful way. In […]
Our View of Last Week
Seeking the waiver. The government has been “passing the hat” in recent days with new debt issuances. Bonte (hard peso) bonds have already contributed around USD 1.5 billion, to which USD 2 billion from the repo were added, bringing gross reserves above USD 40 billion and liquid reserves above USD 20 billion. To meet the […]
The Evolution of the Economic Program: From Unconventional to More Orthodox
Monetary and exchange rate policy has been evolving since Milei took office. Initially, the program included several unconventional elements aimed at rapidly reducing inflation and providing an anchor for inflation. During that phase, interest rates were negative in real terms, the official exchange rate was quasi-fixed, capital controls remained in place, and there were multiple […]
Exchange Rate and Reserves: Two Sides of the Same Debate
The debate on the exchange rate has calmed down now that the dollar floats within the band and its value is determined by the market. It’s true that it’s still not a clean float because there are many exchange controls in place for companies, but the spread with parallel dollar rates has disappeared and the […]
The Alchemy of Issuing Peso Bonds and Raising Dollars
Finally, the Treasury raised dollars by issuing a peso bond to international investors, who purchased it in dollars. Thus, the Treasury received fresh dollars, although the principal and interest payments will be paid in pesos. The move was a good one: it allowed the government to approach its reserve target with the IMF (which we […]
What Will Happen With the Dollars Stashed Under the Mattress?
The government’s plan for getting Argentines to use their stashed dollars has finally been revealed, and everything indicates that the measures are less revolutionary than many expected. Even so, they represent an important step forward: by raising the minimum amounts for transactions that must be reported to the tax agency, people’s lives are simplified and […]
Tierra del Fuego: A Regime Under Scrutiny
The deregulation and trade opening agenda continues at full speed. This is probably one of the areas where the government has made the most progress. Untangling the knot of regulations and opening the economy often involves confronting deeply entrenched business interests. However, the executive branch decided to take a further step on the eve of […]