The former president of the Central Bank of the Argentine Republic (BCRA), Martin Redrado, questioned the package of economic measures announced this Tuesday by the Minister of Economy, Luis Caputo. In this regard, he considered that it is not a “comprehensive program”, but that It is an “extremely short-term” plan.
In statements to Radio with you, the economist assured that what was announced by the head of the Treasury Palace is “a one-year program, an extremely short-term scheme that depends a lot, unfortunately, on the financial cycle.” In this regard, he stressed that it is a “package of emergency measures, which it is noted that It is being done in a hurry and with corrections as the hours go by“.
Luis Caputo’s 10 measures: what economists think about the “emergency package”
For this reason, he assured that to overcome the crisis, which he described as “serious”, “there are other options.” “A program is needed that goes far beyond what we have seen so far, a comprehensive, coordinated program that attacks the fiscal front, the monetary front and, above all, the productive front“he assured.
In that sense, he emphasized that the country “has strategic opportunities in the world that we are not really presenting,” to which he highlighted the need to “a stabilization and growth program supported by laws of Congress”. In this regard, he explained that Argentina needs to support sectors that bring productive dollars instead of financial dollars, such as energy: “There is a very big opportunity with the construction of the missing gas pipelines, and it is true that it can be done with private contributions , that public sector financing is not needed.”
Furthermore, he highlighted that the decision of increasing the official exchange rate by 2% monthly results in an incentive for the carry trade. “If we have an inflation of a little more than 30% in December, 20% in January and 15% in February, the exchange rate is giving you 530 pesos in February at constant values, that is, less than the export exchange rate of the incentive program that we had until last week,” he began.
“This encourages there to be the famous financial bicycle that consists of companies that exchange dollars, place pesos at an interest rate of 120% and buy again. What is called, in financial jargon, carry trade. That is undoubtedly very far from a comprehensive, productive scheme that solves Argentina’s problems.“he continued.
The Caputo plan: raises for retirees by decree, reverse with Profits and increases in rates and fuels
Likewise, he warned that an additional devaluation once the summer has passed “will depend on the expectations that are generated” and the liquidation of foreign currency from exporters. In that sense, he predicted that Argentina will have “a very good soybean harvest” that will generate the USD 20,000 million that were not there this year.
He also called for the enactment of an “economic stabilization law.” that allows public spending reduction plans to be extended over time and have parliamentary endorsement. “We must propose a specific path, constant and resounding, for public spending, for the Central Bank policy, for the monetary issue, for the financing policy. This way we can set the nominal growth of spending for the next four years, which That is voted on by Congress and that each of the ministers, who are the ones who spend, render an accounting in front of Congress,” he specified.
And he added: “The best way to be accountable to the population and, specifically, to generate expectations, is that lower the inflation rate and recover real wages. “We must not generate mechanisms to liquefy public spending, for example, by freezing last year’s budget.”
Along these lines, he estimated that the treatment of a Budget in Congress would have been “much more forceful” so that the real salary would be more protected. “The Government should take note that it needs to launch a comprehensive program and not only emergency measures to avoid inflationary problems, a drop in real wages and also exchange rate tension,” he concluded.