That's a stated goal, but even the IMF (FMI) has acknowledged that the currency controls (cepo) will need to remain in place for some time.
Exactly, nobody, not even the most liberal IMF economists would recommend eliminating the cepo all at once right now.
How do you get rid of the brecha? The same way porcupines mate: very carefully. Nobody wants to be called the second coming of Domingo Cavallo by causing a bank run, and that's what awaits you if you look to eliminate both the cepo/brecha at once.
The solution is simple on paper, but hard to enact when your coalition (the Ks) don't believe there is a structural problem. The only reason this is being talked about now is because the debt is so high that they can't afford to both service it
and continue subsidizing dollar purchases. The reason
@jblaze5779 and the rest of us can do this trick (what's called making
puré in Spanish) is because there is a brecha/cepo which results in a parallel market, and the BCRA shoots itself in the foot by paying for these dollar purchases we make in pesos with dollars/SDRs obtained from the IMF, China, Russia, and the campo. Imagine how much worse it would be if there were
no withholdings on dollar purchases and you got 1 USD for $105.64 pesos with a debit/credit card, and WU was giving us $220.00?
The solution over the span of months, if not a year or more, involves the BCRA slowly cutting down on, then completely stopping its devaluation crawling peg, instead allowing the market to decide the value of the peso. Right now the BCRA decides a rate (until lately it had been around ~3.5% a month) for which the peso was allowed to be devalued against the dollar, and when it exceeds this set rate, it intervenes in the international foreign exchange market to sell dollars for pesos to prevent the currency from sliding further. You can see this easily on days when the blue shoots up, but the Google exchange rate stays the same: it means the BCRA intervened to prevent a larger devaluation than the market demanded, and in turn, pissed away hard earned dollars for less pain in the short term.
The other issue is interest rates. Last year, on average, consumers were paid a 36% APR on savings deposited in pesos. Inflation was 50.9%. This means you lost 14.9% of the value of your money in pesos by saving it instead of spending it. No wonder there is no trust in pesos or money to be leant to fund investment, you're better buying non-perishable food or construction materials and sitting on it then lending to others. And since people can't access credit, the government has to step in and lend money. How do they do this? Through all sorts of schemes that basically give away money. My husband took out a
100K monotributista loan from AFIP for 18 cuotas interest free. We'd be stupid not to,
30.8% of the loan is going to be paid for by inflation, it is $30,802 pesos in free money. If we don't pay, someone has to, and that somebody is the Argentine state.
Finally comes the budget brecha: Argentina in both pesos and dollars spends more than it earns via tax revenue. You have two options, you either spend less or tax more, and with 40% of people in poverty it's not going to be the later. Argentina constantly says it's going to grow its way out of a budget deficit, but GDP growth every year since INDEC stopped cooking the books has yet to exceed 3%. Unless GDP skyrockets to 10% like it did in 2010, and inflation goes below it, the issue remains: spend less or tax more, and as long as it's Ks in charge they're going to refuse to make this tough decision.
As long as the brecha remains, there will be a way for people with dollars to make money off of it, and let's remember there's a reason why many politicians, K or otherwise aren't in a hurry to eliminate it, they're rich in dollar or dollarized assets, whether it's Macri's Millions in USD or Cristina's hotels, they don't worry about inflation or the interest rate because they're fine either way.
