Caputo used the World Cup song and ruled out devaluing

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While waiting for the liquidation of the large harvest to strengthen the Central Bank’s reserves, the Minister of Economy, Luis Caputo, ruled out the possibility of a devaluation of the peso and affirmed that the value of the currency is appropriate for the current context.

The head of the Treasury Palace took advantage of the meeting of the Inter-American Council of Commerce and Production (CiCyP) that was held in Buenos Aires to send a new signal to the financial market, which continues to doubt the continuity of the monetary program, and to sectors of agroindustry prone to maneuver with the grains.

“Some seem to be speculating ‘when will the shock come?’ or ‘when will the dollar jump?’… that shouldn’t happen guys,” the Minister of Economy said in a friendly tone.

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In this way, Caputo seeks to cool expectations of an exchange rate correction that may generate uncertainty among cereal producers and exporters in moments prior to the liquidation of the soybean harvest.

It is worth remembering that oilseed production estimates improved to 50 million tons as a result of the latest rains, which at current prices means an income greater than US$20 billion, most of which would be settled from the end of April to June.

The Government trusts in this inflow of foreign currency to accelerate the exit from the exchange rate and cannot afford delays due to lack of confidence.

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But a good part of economic analysts insist that the Central Bank must accelerate the 2% monthly devaluation of the dollar to avoid an exchange rate delay.

From a more technical argument, he highlighted that the “monetary base was reduced by 38% and the broad base by 30%. It was something we looked for, it didn’t happen by chance.” In the same sense, he defended the negative real interest rate because in this way an uncontrolled issuance of pesos was avoided.

This is not the first time that Caputo has sent this message, which makes evident the struggle with the financial market and a good number of colleagues.

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Far from validating this speculation, Caputo also denied that there is an exchange delay and stated that the current peso/dollar relationship is adequate.

“If we take the exchange rate of December 2015 when Macri took office as a base of 100, we are still 17% above that value. And if we look at the average exchange rate of the last 25 years, at today’s prices the dollar would be barely higher than $900, maybe $930,” the minister explained.

Faced with this description, Caputo stressed that “we are comfortably above those types of exchanges, but in a macroeconomic context that, if we maintain it, is a more solid exchange rate than the exchange rate that coexisted with those times where we had deficits.”

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Along the same lines, he stressed that “we do not see it with the concern that some see it, nor with the anxiety that many see it,” trying to discourage those who are willing to speculate.

During his presentation, Caputo emphasized that “we are not going to deviate from this course,” promised that “stability is here to stay” and tried to convince businessmen to make investment decisions.

“The vote is not enough, we also need your support,” he told the businessmen who were listening to him.

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The minister stated that the disinflation process is reacting “much more as we expected than as the forecasts were.”

Along these lines, he maintained that “conditions are occurring much faster than everyone believed” and consequently promised that next year the tax reduction stage can begin.

Caputo admitted that there is a strong recession but considered that it is a logical consequence of “70 years of mismanagement.”

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Dollar: what happened in the financial market

While the minister gave his speech, a few blocks away the financial market seemed to agree with him.

With slight fluctuations during the round, the blue dollar closed at $1,030 in Buenos Ares, unchanged from the previous round. In Córdoba, it was quoted at $1,041.

For its part, the MEP fell to $1,036, while the Cash with Settlement stood at $1,099.

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In the future markets the panorama was similar, with the price at the end of April at $913 and at the end of April at $964.

The Central Bank completed the round by purchasing US$206 million and so far this month it has acquired US$2,439 million. Since December it totaled US$ 10,931 million.