IMF negotiations stall, reviving debate on floating exchange rate band

[Che1990]

Well this pretty much shows that the current government is “los mismos de siempre” doing “lo mismo de siempre”.

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I hope that link works for the translation, if not here is the original: https://www.iprofesional.com/econom...-banda-flotacion-dolar-y-por-que-genera-temor

 

[sergio]

The issue is the refusal of the Leader to allow a free market, capitalist peso. Ironic, no?

 

[FrankPintor]

There did seem to be an air of "don't call us, we'll call you" as the IMF team left Buenos Aires.

And again, for those who insist that the IMF can lend money to defend whatever exchange rate the iron triangle imagine: "By then, the IMF had spent a fortune, violating its own statute that prohibits it from defending a nominal exchange rate, without Argentina being able to meet the macroeconomic goals it had committed to, and with a total failure in defending the exchange rate". From the article, reprising Sturzenegger and Caputo's last rodeo in 2018.

 

[Che1990]

The issue is the refusal of the Leader to allow a free market, capitalist peso. Ironic, no?

Totally!

 

[LuckyLuke]

Let me get this straight...

Macri borrowed 44 billion from the IMF, which he used all of it to pay off foreign and domestic debt obligations. Despite austerity measures, fiscal deficits persisted and inflation continued.

Alberto didn't pay a penny of the 44 billion back. Austerity was abandoned. Deficits and inflation got worse.

Milei hasn't paid off any of it. Austerity is back. Inflation is being held off using fiscal surpluses to maintain an artificial peg.

Milei is now asking for a fresh 11 billion loan to further defend an artificial peg to the dollar to end future "perceptions" of inflation.

I mean is anyone in the market really going to see all this and think that a magic new economic model in this country has finally cleared the storm clouds of debt overhang to let the sun shine once again?

3 administrations have solved basically nothing because despite all the oscillations of austerity, fiscal discipline, and exchange rate pegs, net foreign reserves are still negative.

 

[daveholman]

Let me get this straight...

Macri borrowed 44 billion from the IMF, which he used all of it to pay off foreign and domestic debt obligations. Despite austerity measures, fiscal deficits persisted and inflation continued.

Alberto didn't pay a penny of the 44 billion back. Austerity was abandoned. Deficits and inflation got worse.

Milei hasn't paid off any of it. Austerity is back. Inflation is being held off using fiscal surpluses to maintain an artificial peg.

Milei is now asking for a fresh 11 billion loan to further defend an artificial peg to the dollar to end future "perceptions" of inflation.

I mean is anyone in the market really going to see all this and think that a magic new economic model in this country has finally cleared the storm clouds of debt overhang to let the sun shine once again?

3 administrations have solved basically nothing because despite all the oscillations of austerity, fiscal discipline, and exchange rate pegs, net foreign reserves are still negative.

Except the government ran at a surplus last year for the first time in 14 years. Previous "austerity" plans failed to accomplish that.

 

[LuckyLuke]

Except the government ran at a surplus last year for the first time in 14 years. Previous "austerity" plans failed to accomplish that.

That's true, however the surplus is only as valuable as it's intended use. Ask yourself, if peso issuance has ceased with "emision cero", and fiscal austerity is now generating budget surpluses. Why does the peso still need to be defended with central bank intervention? What is the market trying to say?

Because it sounds to me like the market is trying to say that negative net foreign reserves is the dead canary in the coalmine and until Milei gives up his futile intervention and starts shoring up the reserves instead, he will either run out of public support for austerity or run of time in his term.

 

[FrankPintor]

An argument can be made that a resource-rich developing country should, in fact, be running a (current account) deficit, in anticipation of windfall resource-generated income (grain exports, Vaca Muerta, possibly eventually lithium). This leads me to two thoughts:

1. A current account surplus is just one more of Milei's shibboleths.
2. There was no real need to put the country through all this pain, jack up the exchange rate, and make Argentinian products uncompetitive.

Alivio para el Banco Central: Vaca Muerta aportará el año próximo US$8000 millones de divisas genuinas

En 2025 entrarán en funcionamiento pleno dos obras claves de oleoductos y gasoductos, que permitirán aumentar significativamente las exportaciones de petróleo y reducir las importaciones de gas

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