President Javier Milei He made a post on his official X account in which he reflected on the discussions about whether the price of dollar official fell behind in real terms after the last devaluation. “Exchange delay?” begins the publication.
“While it is impossible to know the deep parameters (preferences, technology and endowments) for all humanity in the present and the future, so only by chance could a human being determine the vector of equilibrium prices and thereby speak of the deviation , at least briefly we could ask ourselves if a certain policy framework implies a path in that direction,” Milei reflected.
Immediately, the President gave five reasons why the exchange rate remains at an appropriate level with respect to his economic program:
- Financial surplus in the treasury
- Constant monetary base
- Almost zero gap, with purchase of net reserves
- Rehabilitation of the BC balance sheet
- Lifting of restrictions in the exchange market every day until one day the stocks are finally released.
“Therefore, are we facing a case of exchange appreciation or a case of rearrangement of relative prices where Argentina is expensive in dollars given its fiscal and regulatory structure?” he concluded.
Then, Milei reposted a publication by the economist Federico Furiaseadvisor to Ministry of Economy. “Clear what the President sets. The real appreciation is the result of the fiscal and monetary anchor and the sanitation of the BCRA. The collapse in gap, country risk and inflation]reflect that consistency. Real rate rises, nominal rate falls and real appreciation moderates with the crawling peg 2%,” commented Furiase.
The statements are in line with the words given this week by the Minister of Economy, Luis Caputoin his speech at the Buenos Aires Stock Exchange. There he stated that the appreciation of the exchange rate “is here to stay” and that we should not expect “a shock” in terms of the value of the dollar.
“If you do your homework, the real exchange rate appreciates. We are going to live with a more appreciated exchange rate, we have fiscal balance and a trade surplus. If we keep that, that appreciation is here to stay”, noted Caputo at an event organized by the Mediterranean Foundation. “We do not set a real exchange rate goal, it is not a reasonable measure,” he said in conversation with Juan Ignacio Abuchdidfrom the IEB Group.
“Comparing one year to another may be similar but it is not a valid comparison. We are not unaware that many look at that. The average real exchange rate was $880 over the last 120 years. And in moments of confidence, the exchange rate at today’s prices was $560, almost half of today. We are going to live with a more appreciated exchange rate. We have fiscal balance and trade surplus. That appreciation is here to stay, don’t wait for the shock. For those who are still waiting for an expensive real exchange rate: that is not going to happen,” mentioned the head of the Treasury Palace.
On the other hand, Milei reposted a publication from Federico Sturzeneggerpresidential advisor and author of the Base Law and the DNU 70/2023 with which they seek to advance in deregulating the economy. The economist recalled the “Theorem of the impossibility of the public company” which says that “if the State has a public company, the regulatory quality of a sector is inversely proportional to the relevance of the company in the sector.”
“It means that if you have a public company and in a sector sector,” explained Sturzenegger.
“There is an extensive literature on regulatory capture. Companies that attract the regulator to generate regulations in their favor. But when there is a public company, the regulated party is the regulator. An impossible situation,” he added.
The economist maintained that examples “abound.” “Unnecessary monopolies that persist to support the public company. Or else why did we have our heavens closed for 100 years? Why do we have a postal law that gives a monopoly to Correos Argentinos and that even allows the State to open correspondence?
“Why was the absurdity of Law 27,007 that transferred an income equivalent to one GDP to the oil companies? (There is the true cost of the nationalization of YPF). “Why was satellite internet restricted, which will soon allow comprehensive coverage of our country?” Sturzenegger concluded.
