Why might the price of the blue dollar rise soon according to an economist?

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George Colina, IDESA economist, compares the blue dollar's peak value to its current value.

The government’s mission is to maintain dollar and inflation This is controlled until the inflow of foreign exchange from the gross crop starts. in this tune george collina Economist at consulting firm IDESA, sentence: “It shouldn’t be difficult to reach April with a competitive official dollar.”

This expert with Master of Arts training in Economics from Georgetown University and a Master’s degree in Finance from the University of Amsterdam (Holland) believes that The parallel dollar creates a lot of uncertainty and speculation as to what price it can reach, He estimates that it is at a low level today.

Additionally, it analyzes what is needed to reduce Inflation and what will happen in the coming months.

-How do you evaluate the steps taken by the government in the last two months?

-This first concrete solution Was integrity of the official dollar At a significant magnitude. The level of $800 it reached in December 2023 took it above the December 2019 level in real terms, which was $60 at the time following the Cambiemos crisis, and was considered high.

This led to a strong readjustment in prices which led to production Very sharp jump in inflation in December and January, People tolerated it because it is a new government which is also unique in the sense of a liberal discourse which has instilled hope in many people.

In any case, given the strong inflation in December and January, Today the official dollar is not at the level of December 2019, but at the level of mid-2021, It doesn’t yet have the level of a 2022 and 2023 delay, which is a very deep delay, but if monthly inflation remains in double digits we could quickly return to the pre-devaluation scenario of $800.

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George Colina, Idesa Economist, Compares The Blue Dollar'S Peak Value To Its Current Value.

George Colina, IDESA economist, compares the blue dollar’s peak value to its current value.

-In this sense, what impact could the measures until April have on the price of the dollar, when the harvest will be destroyed?

-He Depending on the official dollar exchange rate policy Let the government run. It is to be hoped that they will not delay it and keep it in pace with inflation, so as to reach the harvest with a competitive level which promotes liquidation of foreign exchange.

If monthly inflation is declining in the coming months, and the government generates expectations of fiscal deficit reduction, It shouldn’t be hard to reach April with a competitive official dollar, In other words, it would not be necessary to use the official dollar as an anti-inflation anchor.

-How might the exchange difference between the official exchange rate and the free dollar behave?

-the fact that Parallel dollar creates a lot of uncertainty, Fixed deposits of banks are very liquid. Lelik, who was 28 days away, disappeared; And all liabilities of the Central Bank are in overnight repo with negative interest rates. Therefore, there will come a time when many savers and investors will decide to create dollars, whether in the financial or parallel markets, and this will create a strain on the free dollar.

Thus, Today the exchange difference is low What has happened in the last few years. It is in the order of 50% when it was stable in the order of 100%. But that’s because the parallel dollar is lower, for example, In October 2023, When you touch three digits ($1,000), which is a symbolic number Today it would be $1,650, This is equivalent to the level it was at current prices when Martin Guzmán left the previous government.

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if we go Maximum level of blue, which was October 2020 Coming out of confinement due to Covid, at prices of Today that dollar would be $2,000, Therefore, given the high liquidity of deposits in pesos, low interest rates and this relative lag of free dollars, It makes one think that the difference could start at any moment.

-How do you see the possibility of dollarization of the economy?

,It’s not about forced dollarization, but legalizing the use of the dollar as a currency of exchange and concluding contracts. Thus, those who want to use them legally are free to do so. You have to consider that there are many people whose income and savings are in dollars, therefore, they are in a position to honor contracts in dollars even if there is exchange volatility. With this rule it is not necessary to convert all pesos into dollars, which would be dollarization. that’s it The peso and the dollar co-exist legally,

Low Interest Rates On Investments In Pesos And The Stable Dollar Value May Promote Dollarization Of Savings.

Low interest rates on investments in pesos and the stable dollar value may promote dollarization of savings.

-What could happen to the price performance of the economy in the current political and economic scenario?

-S It is difficult to predict what will happen to inflation in the coming months, The experience of hyperinflation in Argentina and other countries, such as Israel in 1985, which was hyperinflation, would indicate that Reducing high inflation quickly is not enough to reduce fiscal deficit and stop issuing.

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These two ingredients are essential and cannot be absent It is necessary to change expectations in favor There is a decline in inflation and even future commitments and guidelines are reviewed which incorporate a falling price index expected in the future, rather than continuing to adjust to what has been experienced in the past.

In other words, We have to force people to think about reducing inflation And stop taking into account past high inflation. Obviously, one cannot commit to low prices in the future with the risk that inflation will remain high. But review clauses can be agreed upon for this.

Without this type of focus change, which can be called deindexation, mentally it is difficult to go quickly from high inflation to low inflation if you like. Without this component, a reduction in inflation would necessarily have to go through a strong recession, a process that is much more complex and slower, therefore, the rise in prices cannot subside quickly.

-So what can happen in the coming months?

-He 2024 will be a difficult year as the economy is in great disarray. Wherever you look, there are distortions and bad regulations that hinder the normal development of the economy. The purpose of the omnibus law was to provide a legal framework to organize this. Now it remains to be seen how the government implements it. We have to see whether it can be implemented wisely to organize the economy.

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