Correct and incorrect assumptions on dollars and pesos
1st assumption. The exchange rate couldn’t depreciate because the Central Bank had dried up pesos from the market (with the Bopreals and by not lending to the Treasury). The truth is that if they had really dried up the market, the price of pesos (the interest rate) would have gone through the roof. But the […]
A New Start for Deregulation and Micro Reforms
Everyone is waiting for the government to give some signal regarding the removal of FX restrictions. Without a doubt, that is the macroeconomic question of the hour. The uncertainty of the market hides the fact that President Javier Milei finally decided to appoint Federico Sturzenegger as Minister of Deregulation and Transformation of the State. This […]
The Limits of FX Controls Are Becoming Evident
On the surface, last week ended very well for Milei’s government. After six tough months, Congress approved “Ley Bases” reform bill and the fiscal package, including the most contentious issues such as the special investment regime, the increase in income tax, the increase in the minimum rate for personal asset taxes and the moratorium and […]
External Shocks and the FX Spread Compromise International Reserves
The fifth consecutive fiscal surplus and inflation below 5% are important points in favor of the government. In addition, the activity starts a recovery path. What is still under discussion is whether the exchange rate is appreciated. It is a question that has a thousand possible answers many of them with consistent justifications.
After a Good Week for the Government, on to a New Phase
The week ended on a positive note. Inflation was the lowest in 24 months and beyond the rise in utilities, the core CPI at 3.7% was a goal from the middle of the field. The OK from the IMF board was a given, but it is always good to confirm it. And the approval of […]
Overreaction?
In the last two weeks, the financial market has faced one setback after another. The Blue Chip Swap dollar jumped from under 1,100 pesos to over 1,300. The other dollars (MEP and parallel) followed a similar trajectory. We do not see this as concerning. Perhaps more worrying is the fact that sovereign debt prices fell […]
The Importance of Having a Law
The structural reforms law and fiscal packet saga seems to be ending largely because the opposition is running out of excuses not to give something to the government, which maintains a positive image of 55%. Meanwhile, the government is willing to concede almost anything to get its approval because it needs to demonstrate some degree […]
The Dollar and Activity Levels Take Center Stage
Since Milei assumed office, the economy has been moving in one direction: full steam ahead with things improving. Inflation has been steadily falling since its peak in December, the country risk has been dropping from 2,200 points and reached nearly 1,200 a few days ago, and the parallel dollars remained stable. The Central Bank saw […]
Lower Rates and a New Monetay Architecture
The Central Bank lowered the interest rate three times in less than a month. It went from 70% to 40%, which is quite unusual. Especially for a situation where the volatility is not what it used to be, for example, in June 2022. Inflation is decreasing, and so are expectations. However, 40% implies a negative […]
Very Good First 5 Months, Now Policy Will Be More Challenging
In the first months of Javier Milei’s economy, everything went as planned. The efficient management of the government deactivated the risk of hyperinflation in the context of one of the worst inheritances in memory. The data show that the country risk fell by half, Argentine stocks measured in dollars skyrocketed and public opinion bore a […]