Journalist:
The economy of Argentina is undergoing a challenging period, according to economist Domingo Cavallo. In his latest blog post titled “How close is currency unification and liberalization?”, Cavallo discussed the current financial indicators, dollar quotes, and price trends. While he noted some favorable indicators like the reduction of the exchange gap, he pointed out that it may not lead to a significant decline in inflation rates.
Cavallo highlighted the inertia in price behavior, citing that real salaries and pensions have already reached their minimum levels and must increase monthly at rates no lower than the previous month’s inflation rate. He also mentioned the dramatic decline in economic activity, particularly in the construction sector, signaling a deep recession.
When discussing the potential for exchange reunification, Cavallo suggested paying attention to various factors like the real exchange rate, dollar deposits in the banking system, and channeling of dollars into the local capital market. He emphasized the need for careful decision-making and cautioned against rushing to remove stocks in the middle of the year.
Cavallo recommended adjusting the pace of devaluation closer to the inflation rate and splitting the exchange market to create a truly free market without interventions from central authorities. He reiterated that a hasty reunification and liberalization could lead to failure and emphasized
