Argentina's "anything-but-Libertarian exchange controls..." IMF meets in BsAs

[sergio]

IMF mission arrives in Buenos Aires to discuss US$ 11 billion loan

An International Monetary Fund (IMF) team landed in Buenos Aires Wednesday to discuss Argentina's eligibility for a US$ 11 billion new loan to make up for the South American country's currently negative reserves. The mission is headed by the IMF's Western Hemisphere Department Deputy Director...

en.mercopress.com

According to Milei, Argentina would end its anything-but-Libertarian exchange rate controls if the IMF would agree to the US$ 11 billion deal. The IMF experts are to stay in Buenos Aires until Sunday, although talks are expected to continue beyond their departure. “I believe that the result will be a more dynamic and prosperous Argentina,” Georgieva said after meeting with Milei.

 

[Redpossum]

I said earlier that he was trying to borrow even more from the IMF, but the Mileistas here denied it...

 

[FrankPintor]

Is this to bring us back to the original USD 57 billion negotiated by Macri (with the same team now negotiating with the IMF, doubling down on their previous mistakes) and then stopped by Alberto at 44 billion or so? What's the rationale?

A 25% increase in indebtedness... "to make up for the South American country's currently negative reserves"? Last time I checked, negative reserves are when your debt exceeds your assets, so adding more debt somehow "makes up" for this?

 

[daveholman]

Is this to bring us back to the original USD 57 billion negotiated by Macri (with the same team now negotiating with the IMF, doubling down on their previous mistakes) and then stopped by Alberto at 44 billion or so? What's the rationale?

A 25% increase in indebtedness... "to make up for the South American country's currently negative reserves"? Last time I checked, negative reserves are when your debt exceeds your assets, so adding more debt somehow "makes up" for this?

Here's the operating theory (not saying I agree): the $11billioin is not to spend, but to hold as USD reserves, enabling the Central Bank to defend the peso in what is called a "dirty float", where the ARS is allowed to float, but only in a specific range. When it gets to either end of the range, the Bank buys or sells enough pesos or dollars to bring it back in the range.
Once it's stabilized within that range, the guardrails are removed to make it a true floating currency.
Dirty floats have worked some places, failed spectacularly in others. Look up the Asian Contagion in 1997, sparked by Thailand's dirty float scheme, which trashed nearly every economy in Southeast Asia.

 

[FrankPintor]

Here's the operating theory (not saying I agree): the $11billioin is not to spend, but to hold as USD reserves, enabling the Central Bank to defend the peso in what is called a "dirty float", where the ARS is allowed to float, but only in a specific range. When it gets to either end of the range, the Bank buys or sells enough pesos or dollars to bring it back in the range.
Once it's stabilized within that range, the guardrails are removed to make it a true floating currency.
Dirty floats have worked some places, failed spectacularly in others. Look up the Asian Contagion in 1997, sparked by Thailand's dirty float scheme, which trashed nearly every economy in Southeast Asia.

Except that what you suggest would appear to be forbidden by the IMF's rules. From last time round:

"The IMF loan comes with stringent conditions, including that Argentina commit to zero deficit for 2019, and agreements from the Macri government to cut spending and Argentina’s central bank to intervene in currency markets only in extreme circumstances".

And there were victims, including "Minister Luis Caputo, who resigned as Central Bank president on September 25, 2018, after intervening in the foreign exchange market against IMF advice at the time".

It doesn't look like the concept would get much traction.

 

[sergio]

Read this:

https://thehill.com/opinion/5101981-argentina-economic-crisis-javier-milei/

 

[Che1990]

It’s amazing people sing Milei’s praises when really he is following the same failed recipes, and is doing the complete opposite of his sworn ideology. Controlling the exchange is not libertarian, it’s state intervention - everything that he hates. Let’s just see how long until it all blows up in his face.

 

[carride]

Yesterday Caputo announced the lowering of tarrifs for farm exports. The disclaimer is that it is only temporary for 6 months, because the government will lose too much tax revenue if it is permanent. I thought the idea of lower tariffs is so that over time the farms export much more, thus bringing in the needed tax revenues plus increased profits for the farmer.

The plan will reduce export duty rates on soybeans from 33% to 26%, soybean derivatives from 31% to 24.5%, wheat from 12% to 9.5%, barley from 12% to 9.5%, sorghum from 12% to 9.5%, corn from 12% to 9.5%, and sunflower from 7% to 5.5%.

 

[FrankPintor]

Yesterday Caputo announced the lowering of tarrifs for farm exports. The disclaimer is that it is only temporary for 6 months, because the government will lose too much tax revenue if it is permanent. I thought the idea of lower tariffs is so that over time the farms export much more, thus bringing in the needed tax revenues plus increased profits for the farmer.

So the 6 months will be up more or less when the planting season is underway, or about to get underway, depending on the crop, and there will be no added motivation to plant more. Brilliant! The best government in history!!

 

[daveholman]

Yesterday Caputo announced the lowering of tarrifs for farm exports. The disclaimer is that it is only temporary for 6 months, because the government will lose too much tax revenue if it is permanent. I thought the idea of lower tariffs is so that over time the farms export much more, thus bringing in the needed tax revenues plus increased profits for the farmer.

This is exactly the same thinking as companies that won't lower prices a little to increase profits by increasing sales volume.