Dollarization of the Central Bank’s balance sheet by replacing Leliq with Bopreal, loss of the value of the peso by lowering the interest rate on fixed terms and a decree that legitimizes entering into contracts in any currency are the three strongest signs that Javier Milei did not abandon his plan to dollarize the economy. In dialogue with PageI1economists analyze the week of the incoming government in terms of a stabilization or dollarization plan.
There was a fairly broad consensus that Argentina’s inflation problem called for a stabilization plan for the country’s economy. However, this concept became a signifier that enables orthodox and/or heterodox measures depending on who names it.
The thing is that on the continent there have been many stabilization plans since the 70s. In a research work by economists Gabriel Palazzo, Martín Rapetti and Joaquín Waldman from the consulting firm Equilibra studied 50 of them and concluded that only 22 percent were successful in causing and sustaining stability. 80 percent of successful cases began the plan with balance or primary fiscal surplus. This history, along with the non-appointment of Emilio Ocampo, father of Javier Milei’s original dollarization plan, distracted the focus on which critical gazes were placed of much of the power in Argentina and the world. The dollarization scheme was questioned by a wide range of people: from prominent economists to the IMF, to businessmen.
Stabilization or dollarization?
Just fourteen days after taking office, analysts find, not in the fiscal program, but in the monetary program, some signs that the government is on its way to a dollarization regime or similar. “You had to do the fiscal program no matter what,” reinforces economist Fausto Spotorno in dialogue with this newspaper.
*Dollarization of the Central Bank balance sheet: One sign is the launch of the Bonds for the Reconstruction of a Free Argentina (Bopreal), a title aimed at importers of goods and services who accumulate commercial debt abroad and that the BCRA had committed through the SIRA to give them. access to official dollars. Access to Bopreal reduces the pesos that these importers have today deposited in fixed terms and investment funds, counterpart of the placement of Leliq or repos. This implies a change in the liabilities of the Central Bank, replacing the debt in pesos (Leliq, with the banks) with a debt in dollars (Bopreal, with the importers).
“It is the dollarization of Leliq without dollars,” summarizes the director of Economics at Fundar Guido Zack“the truth is that there was no news about the very important credit that the government announced in the campaign to dismantle the Leliq. In exchange, Bopreal was born, which allows importers with debt in dollars with their suppliers (who in many cases are their own parent companies), subscribe to this bond in pesos, which can be sold in advance in exchange for pesos linked to the price of the dollar, or wait for maturity in five years and receive the dollar bill,” he explains.
The chain is as follows: an importer who goes to Bopreal dismantles some position in pesos, such as a fixed term or investment fund, which will probably be backed by Leliq. The commercial bank reduces its assets (Leliq with the BCRA) and liabilities (fixed term with the client). This lowers the BCRA’s remunerated liabilities in pesos and increases its remunerated liabilities in dollars.
“This, regardless of whether it is to dollarize or not, it is dangerous“Warns Zack. Because for the BCRA it is changing a liability remunerated in pesos that has always yielded at negative real rates and has never had problems rolling over, to one in dollars that can become a problem when having to return it. Furthermore, “In this way, a devaluation makes the BCRA’s balance sheet more expensive.”
“It is a measure that It is a mistake thinking about it in the key to the stabilization plan, but conducive to dollarizing“complements the director of Epyca consultants Martin Kalos and adds that by eliminating the Leliq and offering the treasury passes, you also “clean up the balance of the BCRA, transfer part of the debt to the National Treasury and this could increase the interests of the national public sector and therefore the financial result that is proposed to be eliminated.” to stabilize.”
*Lower the interest rate of the Fixed Term: At the beginning of this week, the BCRA announced a reduction in the reference rate from 133 to 110 percent annual nominal. “It is a measure that may be consistent with a national currency stability plan“says Zack on this point and explains: “Because you stop looking back and try to deindex the economy. If you set a low interest rate it is because you are confident that your plan will work, you are thinking that your inflation will not be more than 10 percent per month. Deindexing the economy also means lowering the interest rate.”
However, he warns that “for this you need credibility, an attribute that the Argentine State does not have.” Spotorno agrees: “With this measure, you accelerate the liquefaction process with the same objective: to organize the remunerated liabilities of the Central Bank, because you discourage the fixed term which, remember, has its counterpart in Leliq and Pases. “On this path you are going to reach a point where you decide whether to dollarize or continue in pesos,” warns.
*DNU desregulator: Article which establishes that contracts may be made in any currency, whether or not it is legal tender in Argentina It was the point that analysts agreed as one of the steps that pave the way to dollarization. On paper, the new article 766 of the Civil and Commercial Code establishes that “the debtor must deliver the corresponding amount of the designated currency, whether the currency is legal tender in the Republic or not.” Article 252 of the DNU adds that the parties to a contract are free to determine its conditions. Foreign Minister Diana Mondino confirmed it on her social networks: “We ratify and confirm that in Argentina contracts can be agreed in Bitcoin and also any other crypto and/or species such as kilos of steer or liters of milk.”
The coin is in the air
The analysts consulted by PageI1 They do not determine that this path inevitably leads to dollarization, but they understand that the signals are increasingly stronger. “The currency is in the air,” reflect CIFRA researchers Pablo Manzanelli, Mariana González, Cecilia Garriga and Leandro Amoretti when referring to the enabling of bimonetarism by DNU in their latest situation report. Guido Zack and Fausto Sportorno agree that the measures taken can be consistent (with more or less errors) with a stabilization plan, from which it can be decided whether to dollarize or not.
“I think they are going towards dollarization, for several reasons,” Kalos is encouraged, “If you want to stabilize, it is a mistake to talk about dollarization. Someone will say that you have to keep the electoral promise to the people, but then you take measures (NdR the mentioned above) that are very conducive to this objective.
