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Milei confirmed that the issuance of pesos will be stopped and suggested people take their dollars out of the mattress - Infobae
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Milei confirmó que se frenará la emisión de pesos y sugirió a la gente que saque sus dólares del colchón
El proceso de “remonetización”, típico de economías en fase de recuperación, no se daría esta vez por una expansión del dinero en circulación, sino en divisas. El Presidente descartó que se vaya a acelerar la devaluación del tipo de cambio oficial
www.infobae.com
March 27, 2024
The “remonetization” process, typical of economies in the recovery phase, would not occur this time through an expansion of money in circulation, but in foreign currency. The President ruled out that the devaluation of the official exchange rate would accelerate
By Pablo Wende
Milei aspira a que salgan a circular los dólares del colchón
El Presidente cerró el IEFA Latam Forum
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The President closed the IEFA Latam Forum
Javier Milei yesterday provided more details of the currency competition scheme that he wants to carry out once the stocks are released. In that sense, he assured that the objective is to completely stop the issuance of pesos and that the “remonetization” process of the economy takes place with the dollars that the public keeps in the mattress, although obviously this would be applicable to currencies in fixed terms. or in safe deposit boxes.
The President closed the IEFA Latam Forum, organized by businessman José Luis Manzano and where the director of the Western Hemisphere department of the IMF, Rodrigo Valdés , also spoke .
During his presentation, Milei gave some clues about what the government is thinking about when the stocks are released. However, she did not give details about when it could happen, given the need to continue accumulating reserves and at the same time continue reducing the excess pesos that the economy has.
The idea of “synthetic dollarization” that they allude to on Wall Street coincides with the plan that the President outlined yesterday.
On the one hand, the idea is to stop issuing to finance the Treasury , something that would be provided for by law and whoever violates it will be subject to a penalty similar to that of crimes against humanity. But the offensive does not end there, since at the same time other issuance mechanisms would be cut, for example to pay the remunerated liabilities issued by the BCRA.
“We are going to leave a minimum of pesos in circulation and the process of remonetizing the economy will have to take place by taking money out of the mattress,” said Milei, in obvious reference to the dollars that families keep as a form of savings and ultimately of preservation of the heritage.
In other words, there would be a process exactly the opposite of what Argentina has tried in recent decades. This means that in times of greater economic activity the amount of pesos will not expand, which is always the Central Bank's response to the demand for money. On the contrary, the level of the monetary base would remain unchanged (as is happening now) and the aim is to promote transactionality in dollars.
This is a true paradigm shift, which in other words seeks to reduce the possibility of floating exchange rates after the elimination of the stocks to a very small range. The reason is that there will be almost no pesos to go out and run against the dollar.
In some way, this scheme is what is beginning to be seen in these first months of Luis Caputo's management. Even in his presentation before businessmen convened by Cicyp, the Minister of Economy warned that the peso drought will deepen as the months go by, in line with what the President indicated today.
Milei clarified that the money market continues to be unbalanced and hinted that for now it is not in the plans to hasten the exit of the exchange rate. On previous occasions, she had already made it clear that she needs no less than USD 15 billion to do it. In fact, almost all the obstacles imposed by the previous government remain in place for the moment.
In addition, he ruled out that the devaluation of the official exchange rate, which maintains a monthly adjustment (or " crawling peg ", in financial jargon) of 2% per month, will accelerate. “It makes no sense to do it and those who propose it do not understand anything, because if you add 17.5% to the import dollar, it is at the same value as the financial dollars, that is, there is no gap.”
